Trade In Options – Options Trading Video 15 part 1

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Hey, guys. I hope you guys are out there, trading profitably. Today is May 1, 2008. We are doing our daily review. The market has been open for just a little over an hour and 20 minutes. It’s 10:51 AM, Eastern Time.

We’re just going to take a look at our positions, because we have just turned into May. When we sold the May options, we created our positions for May expiration. Now we are getting close to the point where we can take a close, daily look, the closer we get to expiration. There is a price risk at this point. Adjustments are going to get a little bit trickier at this point.

They are common, but they are a little more tricky, at this point. There’s not as many options when making adjustments. There are still adjustments that you can do, but what you’re doing, is you’re tightening the noose around your strike prices and getting closer to “at the money” options, at this point.

When you do make an adjustment, you really want to make an adjustment carefully. We only have 15 days left. We have 2 weeks before expiration. At this point, what we really want to do, is we want to be able to make our adjustments, if necessary. We’re probably going to be making those adjustments closer to the “at the money” positions.

We are getting down to the wire on our positions. We could probably even start taking a look at trades that we’re going to be making for the next option expiration, which is going to be June. There are still 50 days out. We can put some initial positions on for June. I would go maybe June-July on the SPY.

Let’s take a look at the volatilities. The volatilities don’t seem to be… There’s a positive skew here, but that’s not going to worry me too much. If we go out to the next month, it’s even worse. December, September, is still 21%. July is 21%. It’s actually lower than September, so I would go with July. I would go June-July on those.

Anyway, we’ll take a look at some far out initial positions when we get into another video. What I want to do today is analyze our current position statement. We’ll take a look at our numbers, and go through a thorough examination of our positions.

Our current Delta on overall positions is about $9. This is absolutely perfect, because we do get a little bump up here, today. We’re going to collect an additional $9, as prices rise. Our Gamma is always negative. If we’re short options, we are going to be negative Gamma.

Our Theta has increased nicely. It’s up to $54, $55. Remember, when we first put on our trades, it was around $24, $25. Maybe $30, someplace in that range. It’s increasing now, the closer we get to expiration. That’s exactly what we expect Theta to do.

Our Vega is at 56, which means that if we drop a percentage point in the VIX, we will lose $56. If we gain a percentage point in the VIX, in volatility, than we will make an additional $56. That is a relatively neutral Vega number. We’re not too worried about that at all. The EEM and the IWM are positive Vega. The Diamond and the SPY are negative Vega.

If volatility does drop, and we continue our upward climb in the markets, we’re going to be looking good on the Diamond and the SPY. We are going to get hurt a little bit on the EEM and the IWM position.

Our profit is starting to grow. Our profit today is beginning to grow. We’re starting to grow on a daily basis, here. If we take a look at our Analysis tab, and we take a look at our overall portfolio, you can see that we’re doing well. We’re up fairly well, here. We’re doing well, and I think that our position is looking beautiful, at this point. We are in the center of our profit picture. There are no adjustments that we really need to do today. If things run up, we’re going to have to do some adjustments – maybe something closer to the money on the SPY, or possibly something on EEM.

We also have the queues in our back pocket, that we can always make adjustments on. Those are really nice to do, closer to expiration, right at the money.

I think we look really good. The only thing I am concerned about is the VIX. Let’s take a close look at the VIX, here. Yesterday, the VIX was up just slightly, when the market was up like $100. It was an indicator that the market could have gone down.

What happened was, yesterday there was a Fed announcement, about a quarter-rate interest cut. Right after it came out, the market dropped about 150 points. It was up about 100 points, and it just went to flat, or just slightly negative for the day. I think it was down about 11 points.

The VIX went up almost a full percentage point

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