I have created 7 LTB trades out of a potential 10 candidates. Four had to be discarded because the necessary strike prices did not exist. I am not very happy with the results. It takes a long time to try to figure out how to modify the trade to make it attractive. I am affraid I have to claim ignorance here again. So please do not use blind faith. I am trying to learn here. Only the RMBS and AMR trades seem to be interesting enough to try in my own account. It looks like a momentum stock like RMBS may be the best candidate. First, there are lots of strike prices to choose from and the high implied volatility may have helped with the "sour spot". As you can see, the breakeven points are well above and below the current price, so the trade allows for quite a bit of movement before expiration.
I am wondering now how would this trade compare with a Condor.
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Trade number: 1
Trade name: LRB AKAM
TRADE LINK:
LRB AKAM
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LRB|AKAM™_date=2006-04-12&sym=UMU&num_legs=5&tra0=-15:Q06:25.000:0.350:AKAM:2006-04-12:61.12099838:CCFFFF:0:0&tra1=10:E06:30.000:2.900:AKAM:2006-04-12:59.56800079:CCFFCC:0:0&tra2=-20:E06:35.000:0.850! :AKAM:2006-04-12:54.64400101:CCFFCC:0:0&tra3=10:E06:40.000:0.300:AKAM:2006-04-12:60.23600006:CCFFCC:0:0&tra4=15:T06:25.000:1.050:AKAM:2006-04-12:50.71200180:CCFFFF:0:0
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Trade number: 2
Trade name: LTB AMR
TRADE LINK:
LTB AMR
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|AMR™_date=2006-04-13&sym=AMR&num_legs=5&tra0=-20:Q06:22.500:0.75:AMR:2006-04-13:67.69999695:FFFFFF:0:0&tra1=10:E06:25.000:2.600:A! MR:2006-04-13:64.69200134:FFFFFF:0:0&tra2=-20:E06:30.000:0.60! 0:AMR:2006-04-13:56.95100021:FFFFFF:0:0&tra3=10:E06:35.000:0.150:AMR:2006-04-13:60.97600174:FFFFFF:0:0&tra4=20:T06:22.500:1.850:AMR:2006-04-13:60.52600098:FFFFFF:0:0
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Trade number: 3
Trade name: LTB CAL
TRADE LINK:
LTB CAL
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|CAL™_date=2006-04-13&sym=CAL&num_legs=5&tra0=10:E06:25.000:3.5:CAL:2006-04-13:61.87599945:FFFFFF:0:0&tra1=-25:Q06:25.000:0.950:CAL:2006-04-13:59.52000046:FFFFFF:0:0&tra2=-20:E06:30.000:0.900:CAL:2006-04-13:52.88100052:FFFFFF:0:0&tra3=10:E06:40.000:0.05:CAL:2006-04-13:59.29700089:FFFFFF:0:0&tra4=25:R06:25.000:1.550:CAL:2006-04-13:60.70299911:FFFFFF:0:0
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Trade number: 4
Trade name: LTB TIE
TRADE LINK:
LTB TIE
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|TIE™_date=2006-04-13&sym=TIE&num_legs=5&tra0=-20:Q06:50.000:1.950:TIE:2006-04-1! 3:58.29899979:FFFFFF:0:0&tra1=15:E06:55.000:3.800:TIE:2006-04! -13:58.88899994:FFFFFF:0:0&tra2=-30:E06:60.000:1.900:TIE:2006-04-13:56.75699997:FFFFFF:0:0&tra3=15:E06:65.000:1:TIE:2006-04-13:58.77099991:FFFFFF:0:0&tra4=20:R06:50.000:3.100:TIE:2006-04-13:59.05199814:FFFFFF:0:0
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Trade number: 5
Trade name: LTB TRID
TRADE LINK:
LTB TRID
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|TRID™_date=2006-04-13&sym=HVU&num_legs=5&tra0=-20:Q06:25.000:0.900:TRID:2006-0! 4-13:63.63499832:FFFFFF:0:0&tra1=10:E06:30.000:1.450:TRID:2006-04-13:62.39199829:FFFFFF:0:0&tra2=-20:E06:35.000:0.25:TRID:2006-04-13:54.17300034:FFFFFF:0:0&tra3=10:E06:40.000:0.1:TRID:2006-04-13:63.15700150:FFFFFF:0:0&tra4=20:S06:25.000:1.900:TRID:2006-04-13:60.45500183:FFFFFF:0:0
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Trade number: 7
Trade name: LTB RMBS
TRADE LINK:
LTB RMBS
Trade browser URL:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|RMBS™_date=2006-04-13&sym=BNQ&num_legs=5&tra0=-10:Q06:40.000:4.800:RMBS:2006-04-13:126.05400085:FFFFFF:0:0&tra1=10:E06:45.000:6.400:RMBS:2006-04-13:126.25099945:FFFFFF:0:0&tra2=-20:E06:55.000! :3.100:RMBS:2006-04-13:120.46700287:FFFFFF:0:0&tra3=10:E06:65.000:1.600:RMBS:2006-04-13:122.16999817:FFFFFF:0:0&tra4=10:T06:40.000:6.400:RMBS:2006-04-13:86.51799774:FFFFFF:0:0
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http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=LTB|RMBS™_date=2006-04-13&sym=BNQ&num_legs=5&tra0=-10:Q06:40.000:4.800:RMBS:2006-04-13:126.05400085:FFFFFF:0:0&tra1=10:E06:45.000:6.400:RMBS:2006-04-13:126.25099945:FFFFFF:0:0&tra2=-20:E06:55.000! :3.100:RMBS:2006-04-13:120.46700287:FFFFFF:0:0&tra3=10:E06:65.000:1.600:RMBS:2006-04-13:122.16999817:FFFFFF:0:0&tra4=10:T06:40.000:6.400:RMBS:2006-04-13:86.51799774:FFFFFF:0:0
3 comments:
JUan,
It is like anything, it looks easy when you are shown the perfect trade, with ideal conditions...
Volatility in a way could be viewed similar to the underlying price.
If a stock goes down and looks cheaper, then you can buy some at a cheaper price. The problem is that the price could go down low. Volatility can be viewed in a similar way. Up or down...
For both the price of the underlying and the volatility of the Option;
Buy low, it could go lower.
Sell high, it could go higher.
Best Wishes.
There is no perfect trade in real life. Everything has a risk associated to it. However as long as we have proper money management and have probability working in our favour then in the long run you can be very successful. PCCRC which Juan has so kindly shared with us will do it for us in the long run.
LTB was introduced by Eloy (Optionetics Instructor) in OASIS 2005. (I never attended). However, it was interesting to see the discussion in the forum. His way of trading LTB is longer term generally 4-9 months out. At that time I back tested this and had limited success
When we were doing DNA case study (for which I had a real trade on using PCCRC), we were loosing money as stock was going down with low volatility.
This triggered me to investigate alternatives and I used LTB for shorter time frame. The example I produced where the graph looked really good was OIH (I am negative territory currently, but it will start making me money soon).
The idea of LTB is that it takes advantage of volatility drops when stocks go higher and vice versa when it goes down.
Again this is not a holy grail. It is another toolbox in our kit. When we get into a trade this is another way of trading.
From a personal stand point, the importance here is to test it as a strategy and a system where it consistently makes us money in the long run. If it does that the we are happy traders.
I DO believe that there is always a shine in every trade strategy. I am sure that Eloy has learned by his own experience to recognize good candidates.
I have had to discard many high fliers because of their high volatilty, fearful for the volatility crush. This is another tool indeed. It is up to us to learn from our papertrades and come up with a set of rules to get some consistent gains.
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