Current positions

Here are my current positions, all of them iron condors expiring May 17. I’ll abbreviate as follows: symbol, long_call short_call short_put long_put, short call delta (chance of expiring out of the money), short put delta (chance of expiring out of the money), IV Rank (IVR), risk/reward ratio (RR), date of entry, amount of credit at entry

  • CGC, c+60 c-55 p-35 p+32.5, call delta 23 (82%) put delta 17 (76%), IVR 47, RRĀ 2.6:1, 3/19, $0.45
  • GDXJ, c+39 c-36 p-30 c+27, call delta 19 (83%) put delta 5 (94%), IVR 34%, RR 3.8:1, 3/15, $0.62
  • STNE, c+55 c-50 p-33 p-28, call delta 22 (84%) put delta 19 (74%), IVR 70%, RR 2.8:1, 3/20, $1.31

By Tim Bovee, Portland, Oregon, March 30, 2019

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Some recent completed trades

BMY iron condor, expires 4/18/2019

IV Rate 66%

Call spread: -60 delta 19 (85% chance of expiring out of the money) / hedge +65

Put spread -45 delta 15 (82% OTM) / hedge +40

risk/reward ratio 4.3:1

Entry $0.95 credit per contract 2/15/2019

Exit $0.44 debit per contract 3/19/2019

Result: +115.9% (+$0.51) yield over 32 days +1,322% annual rate

XLI iron condor, expires 4/18/2019

IV Rate 77%

Call spread -80 delta 21 (79% OTM) / hedge +84

Put spread -72 delta 17 (82% OTM) / hedge +69

Risk/reward ratio 4.6:1

+117.24% yield +1,945.14% annual rate (+$0.34)

Entry $0.63 credit per contract 2/25/2019

Exit $0.29 debit per contract 3/19/2019

Result +117.2% ($0.34) yield over 22 days +1,945% annual rate

By Tim Bovee, Portland, Oregon, March 30, 2019

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

 

New Trading Rules

My new trading rules are straight out of research conducted by Tom Sosnoff‘s Tastytrade financial network. It is intended for smaller accounts, and has the goal of many base hits rather than the occasional home run amid a lot of strikeouts.


Trading Rules

Positions: Short vertical or iron condor spread.

Short leg entry goal: delta 16

Implied Volatility Rank (IVR) 25% or greater. (This is similar to the IV Percentile)

Entry timing: As close as possible to 45 days prior to expiration, giving preference to monthly options.

Exit timing: No later than 21 days prior to expiration

Due diligence before entry:

  • Avoid earnings announcements
  • Avoid ex-dividend days

Management:

  • Short Iron Condor: At 50% loss of maximum potential profit, move untested short leg to delta 30, moving long leg to conform. 
  • Short Vertical: Exit at 50% loss of maximum potential profit, or…
    • Add a short leg on the untested side at delta 30, adding a long leg in the usual manner.

Maximum potential profit is calculated as this way:

(credit_received – current_debit) / credit_received

where credit received is maximum potential profit and current debit is the cost of exiting the position. If it’s negative, the position is a losing one at present.


The upside of this rule set is that there is consistently an 85% or so chance of the position being profitable, with clear rules for management in those 15% of cases where the positions moves outside of the zone of profit.

The downside of the rule set is that the credit upon entry is relatively low compared to other strategies, and therefore the risk/reward ratio tends to be higher. The brokerage sequesters more of your funds to support each trade. It’s a common decision traders must make.

In earlier strategies, I would insist on a risk/reward ratio no higher than 3:1. That guideline has been tossed out. I’ll accept the higher risk, limiting it by the percentage of trading funds that I want to commit to a single position.

The positions are actively managed, so in practice, it would take a catastrophic move for a position to reach the maximum potential loss.

Up next, a few test trades that I’ve made using the new strategy.

By Tim Bovee, Portland, Oregon, March 30, 2019

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

 

… and Private Trader is back!

It was a nice sabbatical, which, in true Private Trader fashion, I spent obsessively reworking my trading practices. I mean, come on. We love trading. We love the markets. How else would people like us spend their time?

My prior practice had centered on earnings announcements, using the Iron Fly strategy: A short call vertical spread and a short put vertical, each with the short leg having the same strike price. A cousin of the iron condor.

The Iron Fly made for high velocity trading, but also with a high rate of losses.

I’ve decided to move to a more conservative strategy. Part of that is age — I’m 73, retired, and so conservation of funds is increasingly important. Also, I’m looking for a more measured approach than by event-centered strategy could provide.

Coming up, my new trading rules, followed by some examples of recent trades.

By Tim Bovee, Portland, Oregon, March 30, 2019

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