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I got some pain. Woke up and could have closed my trade with 75% of the profit and avoided any impact of CPI. I didn't do that and ended up ITM...I'll likely end year positive, but will be a grind to get there.
Lots of volatility right now! There's a chance that people will lose their marbles again in light of next week's FOMC meeting. My recipe right now:
1: trade intra-day puts very cautiously. Maybe at 0.15-0.20 premium at most.
2: hold off the next-day trades until right before the market close. Start writing no more than 30 minutes prior to close. I'm really concerned about an unraveling right before the close. Watch out for that before the Friday close. That's probably the most dangerous day for people to throw in the towel...
3: A lot of the vol recently came from intra-day moves. So, a welcome profit opportunity should be the puts expiring on Friday at the open (the SPX options rather than the SPXW contracts). If I can sell at 100-150 pts OTM for a reasonable premium, right before the Thursday close, I'd take that bet.
@earlyretirementnowcom Thanks mate. Have noticed the end of day ramp happening on a consistent basis. I have gone from selling in the last 5 minutes of close to the last 15-20 mins of close to avoid the EOD ramp. This is for days that are not strongly directional. For days like CPI where the market is strongly down all day, sticking with trading in the last 5-10 mins of the session as you mention. Also agree with you about the Friday sessions, have noticed that people do not want to be long into the weekend leading to weakness towards the end of the Friday session 👍
@setspreads Well, that dinged me yesterday. I sold the 3650 and 3655 puts when the index was at 3780. Then the S&P dropped to 3757 in the last 10 minutes. And today the drop continues. Bad timing.
@earlyretirementnowcom those Friday AM expirations (the monthly, I think) seem too good to be true. Wish I could trade that every week. After the open, I then sell the Friday close option for $0.50 premium.
The hard one for me is going over the weekend with a higher premium, if I'm following the 1.5 approach.
Love this approach, and real key is having a way to know when to back of or put on risk. When the next day OOM for 0.70-0.75 options starts starts getting less than 100 pts, I get a little nervious.
@navypack I try to play those Friday AM expirations every month. Seems like a safe bet. Recently, the intra-day vol has been much higher than the overnight one!
Hi Ern,
I remember you said that if yesterdays options are way OTM you trade some extra intradays. In such case, do you close previous OTM positions to maintain same leverage or just sell extra trusting that 6/7 STD positions are unlikely to become ITM anyway?
I used sell 3 cts T+1, thus if on T they are deep it would sell extra 1 ct intraday without closing previous day positions increasing leverage and then sell 3 cts EOD again for T+1.
Not sure it's safe anymore...
Thanks
@john If the old puts are trading with a B/A =0.00/0.05, I just leave them. As you said, I trust that a 6 or 7 sigma event doesn't happen all within the trading day.