Option Trading Mathematics (how to read?)
We entered an Index Option position today.
1200/1225 - 1400/1425 x3
Max option trading reward : $585 if 1225 - 1400
option trading risk : -$1983 if below 1225 (2.1%) or -$2800 if above 1400 (7.4%)
Max option trading risk : -$6915 if below 1200 or above 1425 (3%)
Expected Value: $274.15
Option Trading Thoughts
Today’s correction has helped our portfolio accomplish all three of the objectives we listed yesterday. Our delta improved from -33 to -17 and our theta is now at 57.
Our Oct option positions have a delta of -9, theta of 31, risk Expected Value of $230 and a toal Expected Value of $794.55. That means we are in a very good/safe point with a very high chance that the Oct option position is another winning position (92% winning percentage).
The Nov option position are not as solid as the Oct position. We are working with a smaller overall range as we moved up the put side strike price to 1225 (1225 - 1375). Percentage wise, however, this only increased our losing percentage by 1%. Our winning percentage is still above 80% at 80.75% with an EV of $247.15. Note: Realized gain increased by $236.50 as the result of today’s transaction. We will not include this number, however, until the Nov options expire.
Option Trading Mathematics (how to read?)
We entered an Index Option position today.
1175/1200 - 1375/1400
Max option trading reward : $350 if 1200 - 1375 (81.62%)
option trading risk : -$430 if below 1200 (3.38%) or -$955 if above 1375 (15%)
Max option trading risk : -$2150 if below 1200 or above 1400 (8.6%)
Expected Value: $127.89
Option Trading Thoughts
We are taking on some additional risk by entering this position before the Sep option expire. However, with 4 trading days left and a 25 point cushion, this risk is minimal. We also had about $3400 available funds collecting dust. So instead of waiting for the Sep option to expire to establish a Nov position, we decided to get a leg in first. This will allow us to collect an additional week of time premium before we complete the rest of the Nov position next week.
Option Trading Mathematics (how to read?)
We entered an Index Option position today.
1175/1200 - 1375/1400 x2
Max option trading reward : $456 if 1200 - 1375 (83.41%)
option trading risk : -$1250 if below 11200 (3.28%) or -$1836 if above 1375 (13.12%)
Max option trading risk : -$4540 if below 1200 or above 1400 (7.67%)
Expected Value: $98.41
Option Trading Thoughts
The position is more conservative because our Sep option contract is still under pressure on the call side.
The maximum option trading risk we want to take on is $1985 and we are fairly close to that on the call side at $1836. So, only about half of the buying power available was utilized because of this and the additional fact that the volatility is pretty low. With the passing of time the potential loss of $1836 will decrease and hopefully volatility will pick up as well. Then we will use up the rest of the buying power for Oct.
