Good Morning All,
I added 3 – 76 IWM calls to the December M3 position to help with upside Gamma trend in the event of a Romney win last night. Apparently, I didn’t need to worry about that as it was not a very close decision.
I would expect a bit of volatility this morning as the big guys take advantage of the news and flush out as many long positions as they can before they resume buying.
That’s all for now, I will keep you updated with any changes.
John
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Basic bearish Butterfly
M3
http://www.smbtraining.com/blog/yesterdays-option-tribe-meetingm3-trading-strategy-by-john-locke
May/June advanced Bearish Butterfly
http://optionstribe.com/2012/03/recording-simulated-march-bearish-butterfly-review-john-locke
Forrest one of my students on SMB…Trading the M3
BB page
http://www.smbtraining.com/overview/bearish-butterfly
M3 launch meeting
http://optionstribe.com/2012/07/recording-m3-trading-system-john-locke/
John,
I’m trading the M3 and watching the Bearish Butter.
On the Bearish Butter, you did a roll from 800×50 to 820×50. I understand this delta/theta move.
What I don’t understand is why an 800×50 isn’t bought in again, now that the RUT (interday) is below 800. Seems like you’d want to capture premium here, especiall since its a “00” number and market could stall, but I believe your next downside move is all the way downl to the 780 with a roll.
Seems like you’ll loose all the 820 profit you’ve accumulated and not capture any 800 profit by waiting for the RUT to get to 780.
If at 2:30 MT it’s below 800, wouldn’t at ATM buy be warranted? I think I’d feel more comfortable buying a 800×50, rather than waiting for a 780 roll? Is it wrong to buy at 800 now, keep the 820 also (have a flattop) and roll the 820 to an 780 or even keep the 820 and 800 and buy the 780 and have a downside tent?. Then start a downside 10 pt roll?
Also, if I sign up for mentoring, do I have to use all my time in one meeting, or is it broken up in chunks, like 15 one day, then 15 minutes another day
Thank You
Hi Nick,
This trade follows the basic beginner guidelines exactly…. or as close as I can with my schedule. The guidelines dictate that I hold the current position until RUT is under 790.
What you stated is true, IF I add an 800 and IF the market stalls, the position would gain money faster than the current position. It should also be noted that if the market continues down hard or it capitulates, then the trade would be much more likely to draw down and possibly take a loss, if I added an 800 butterfly. So the question becomes what is the market most likely to do. Based on my experience, it is very rare for a sharp down move to stall for more than a few days, it is much more likely to either continue down or capitulate with a very strong bounce. In other words I would not expect the market to just stop, but rather, I would expect a significant movement away from where it is now. Since, in my opinion, we do not stay near this area, the safer choice is to keep the butterfly size reduced.
John