Update (12/31/2022):
It seems that new users have trouble registering for the forum. The confirmation email never shows up. I’ve decided to phase out this forum and transition over to a new forum plugin. The new location is here:
https://earlyretirementnow.com/forum-3/
Policies – please read!
- Everyone can read posts, but to start a new topic or add a reply you’d need to register. To create an ID, please verify your email address. You will get a link at that email address and you can then pick a password.
- Be courteous to others. Treat others like you like to be treated. Discuss the issues. No ad-hominem attacks!
- It’s OK to include external links if they are relevant. But please avoid spamming! Please no affiliate links.
- Before starting a new topic, please check if that question/topic has been discussed before already and add to that discussion instead of starting a new topic.
- If you’ve written a cool blog post that you want to share with others please post this in the “Self-Promo” category only!
- Please read the usual Disclaimers and the Privacy Policy!
- The forum policies may be amended in the future!
Nice! I waited until this morning (12/24) to roll.
Also, keep in mind that today is a short trading day. NYSE market close at 1pm EST (3h before normal)
Sold 28 Dec 3590 for $0.95 with underlying trading around 3695 and delta about -4 and IV of 14 and VIX at 22.5.
What is fair comparison to put selling? I was comparing to 100% S&P, but seems a comparison to my normal AA of 72/28 is better. Thoughts?
@navypack not to be overly vague and Socratic but it depends on what you would do with the money otherwise and when you’re planning to use it. IMO you would look at a few benchmarks and compare both return and risk. Perhaps your normal portfolio, 100% S&P, risk free rate (for us as personal investors I think this really the one or two year CD rate not the 1mo treasury).
For me that range is relevant because some of the money is in my put writing because I am trading some upside for reducing risk. I could derisk the portfolio by assigning some portion to cash but I prefer this option as it gives me risk/reward in line with what I want for that portion of the portfolio without managing a pile of cash.
Sold 4 Jan 3630 for $1.70. Underlying was trading around 3745 and delta of the option contract was about -0.05. Feels greedy, but a 115 point drop on Monday seems unlikely.
VIX was 22.5 and IV was around 16.5. Does this show the overall VIX structure (i.e. 30 days) is more volatile than this single-day option?
When I calculate my buy based on a volatility multiple or vol*delta, which voliality matters?
@navypack if you’re using the brokerage’s implementation of Black Scholes to get the IV on the trade, I bet they’re not correcting for the number of market days between Dec 31 and Jan 4, and the reduced chance of a volatility event during the holiday weekend. The market has priced those things in. This effect would be magnified for shorter expirations of course as adding 1 day to a 45 DTE option doesn’t mean nearly as much. I expect you saw the same on Dec 24 and to a lesser degree on weekends in general.
@nobatmanjokes Great point! Guess I need to buy that book ERN recommends and start doing the math!
Sadly, there is only so much time and I have too many interests!
@navypack although I highly recommend spending some time to understand the math, in this case it’s about just knowing where the inputs need to be tweaked. At a minimum I would think it’s useful to understand what the inputs to black scholes are and how the inputs impact the price (small and large changes). That plus trading experience as tuition will get you pretty far! I don’t calculate every day, in practice I just treat the long weekends mostly like regular weekday trades instead of my usual slight reduction in premium for the weekend.