/CLZ5 short strangle

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I just opened a short strangle position on the December contract of WTI crude oil.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 9/29/2015 /CLz5
(dec)		 45.40 2 short 35 P 0.32 0.07 49 $1200 $7.42 – –
2 short 58 C 0.28 0.09 $7.42
2 10/20/2015 /CLz5
(dec)		 46.06 2 long 35 P 0.07 0.03 28 – $7.42 bought to
close		 $900
2 long 58 C 0.08 0.03 $7.42

My previous crude trade is still open, but it’s safe with deltas 0.02 on both legs, so I’m going to let it expire in 2 weeks. This trade is very similar to the previous one.

Trade reasoning

For the last few weeks, oil has been trading in a nice range. The OVX at 49.25 is still high, so you can still get good premium for selling options. Unfortunately, Thinkorswim seems to be acting up, and I can’t get a clear reading on the implied volatility of CLZ5.
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/ZNZ5 November short strangle

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I just opened another 10 year treasury short strangle. My previous one, which will expire this Friday, was very successful. I’ve been keeping track of the treasuries market ever since, and I feel like I’m getting to know this instrument as well. I have gathered my findings in my treasuries trading guide, in case you want to learn more about it.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 9/21/2015 /ZNZ5
(November)		 127’170 5 short 124.5 P 0″04 .08 32 $703.13 $15.35 pending pending
5 short 130.5 C 0″05 .08 $15.35
2 10/02/2015 /ZNZ5
(November)		 129’290 5 long to close 124.5 P 0″02 .02 – – $15.35 – -$1,171
5 long to close 130.5 C 0″22 .31 $15.35

I opened 5 contracts on each side, making for an initial margin requirement of about $4,100. I am keeping it safe with the lower than 0.10 deltas on each side, making this a high probability trade. Because of the large number of contracts (10 in total for this strangle), the commission is pretty high, $30.70. I’m going to have to talk to TD Ameritrade about this later this year, once they see that I’m an active trader. It seems they can be bargained with, as described on optionalpha.

Trade reasoning

/ZN has continued to move in a very nice range for quite a while, despite the flash crash in late August, and the excitement around the FED meeting. It’s sort of shocking actually, to see it still in it’s range.

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Paper money trades with double deltas

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As you know, I am very conservative in selecting my short strangle trades, with respect to both the underlying instruments, as well as the risk. I look for deltas at or under 10%, to keep the probability of the strangles high.

The beauty of selling options via short strangles is that even if the market moves against you, you can still adjust your position as you see fit. You can adjust as much, or as little as you like.

I think it would be a very interesting test to see, how the short strangle strategy would work, if one accepts a higher level of risk. For this reason, from now on, I will be using Thinkorswim’s Paper Money platform, to test the exact strangles I create with real money, but at double the delta. The potential profit will be much higher, and with higher profit, you also have more room to adjust the trade as needed.

This will be a very interesting experiment, and I will make the results public along with my real trades.

/CLX5 short strangle

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I just opened a short strangle position on the upcoming month contract of WTI crude oil.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 9/10/2015 /CLX5
(november)		 45.63 2 short 35 P 0.18 5 35 $760 $7.42 expired OTM $760
2 short 58 C 0.20 7 $7.42

This is another high probability trade with low deltas.

Trade reasoning

I’ve been eyeballing oil ever since it’s implied volatility spiked, with the massive 25% increase it had in 3 days. I didn’t have the nerves to open a short strangle when the IV was at its peak, but it’s still relatively high, so now was the time. Read more