Comments on Entering a PCCRC

There are several ways of entering a PCCRC. Since each leg of the trade CAN be different in the number of contracts, strike price and expiration, each user may find its one approach. Each broker may do the entry differently, so please find out the limitations with your broker. Here are some facts you may want to consider when entering your trade. Please share if you have experienced something different.

1. Most brokers will allow the entry of the trade in a single ticket, IF YOU CALL IT IN. The advantage of this is that you may shave some off the cost by entering a limit order. The problem is that if it does not get filled, it is unpractical to change your order until it fills. You can certainly call back with a different price, but it would be easiest if you can play with the order a little.

2. Interactive Brokers allows for the entry of a 4-legged COMBO, and they could all have different legs. This is the ideal situation. This is ideal, since IB has some of the lowest commissions around. The problem is that the IB interface is otherwise not very friendly and other great features that OptionsXPress have are absent in IB.

3. OptionsXPRess allows Ratio Calendars, Condors, short and long straddles, all of which can be used to leg into a PCCRC. When leging into a trade consider the following:

a. You may enter a Put Ratio Calendar as the 60 min stochastics is about to reverse and the enter the Call Ratio Calendar at some point thereafter. I find this solution to be stressful. After all, the very reason that you want to enter this trade is not to make any commitments up or down. If you are filled at a good price on the put side, yo may get a terrible fill on the call side. That is you are favoring the first entry.

b. Enter the long-term portion of the trade first, as a long straddle, followed by the short-portion of the trade. This is probably the best approach for several reasons. One, the expensive portion of your trade is the long-straddle, so you want that to fill at a good price, then you can enter the short at a reasonable good price or even at market.

c. When entering the long straddle, you hope to get a good price when volatility is low. I have found that between 2:30 and 3:00pm EST is the best time to find a cheap straddle. I follow the price of the straddle I hope to enter from early after the opening, and bid for a good price. If its filled, I then enter the short that is usually filled during the high volatility, last hour of the day.

d. If the short is not filled, I am not worried because a strong movement over night would actually be beneficial. I could also fill the short straddle early in the morning, when IV is also high.

e. IF my long straddle is only partially filled, I could complete the whole position with a CONDOR. For example, let us assume that I planned to trade 20 longs and 10 shorts. I place my long straddle and only 10 contracts are filled on each side (calls and puts). I could complete my trade with a 10/10/10/10 Condor in the place of the short straddle. This has occurred to me, and I believe that this is the best possible outcome, because with a partial fill, you know you've got a good price. The Condors are also a good way to bargain with the price. Condors are price well at times of high Volatility.

f. Enter the Condor first, then the remaining long straddle. This may trigger some daytrading safety alarms at your broker's computers. Be sure to check with our broker. You could enter the Condor early in the morning and then the Long Straddle between 2:30 and 3:00. I have given up this method, but you may consider it as an alternative.

g. If you do NOT trade intraday, I would recommend IB, since you can enter one price for the whole trade, or simply call your trade in. There are plenty of opportunities that fit my strategies. Being patient is the best way to trade. Choose carefully, and give your broker room to fill the trade. In the end, we will only save as small portion of our potential profits.

When Exiting the trade:

If you are trading with IB, you can close the whole position in one ticket, as described for the entry.

With OptionsXPress I usually exit the losing portion of the trade first. For example, if the trade has been rallying strongly, exiting the put portion would not leave me unprotected. The call portion is probably going to be easy to trade out, since the options ITM.

You can also exit a high volatility Straddle better than a low volatility straddle. Here we want to exit quickly. I find that the ratio calendars are easy enough. This is not the time to save additional money, it is time to take profits are run. A loser trade is best to be taken off your mind as soon as possible.