Rick's system

Nabire

New member
Can someone set out the entry and adjustment rules as far as we know them to be? Then maybe Rick can correct and amend as needed. There could be additional strategies for trading Crude oil as well.
Richard
 

M75

New member
There are somewhere between 4 and 8 separate trading plans discussed in this group. And several variations of style on each plan. So none them are right or wrong but they are used for different reasons.

We need to categorize each plan with a name and then identify each category of variation.

An example of different plans might be an Iron Condor (IC) at +/- 10 deltas, versus 16 delta (1 SD), versus 20 or 30 deltas versus an ATM Iron Butterfly, versus the same set of parameters for selling naked straddles/strangles. And each of these could be different depending on what expiration dates you choose (DTE). Gamma scalping and reverse gamma scalping along with OTM broken-wing and unbalanced butterflies (similar to road trip BWBs) on either side of the market.

An example of the variations could be how far you choose to place your wings. Some might choose 15 point wide wings, others use 1 or 2 points for different reasons. Another is when you would close, or roll or take profits.

An example of a category might have more to do with personality: Someone who wants to look at it less than once a week would choose some of the same plans with different parameters than someone who wants to adjust every day.

I don't want to confuse the issues with so much data. The complexities exist, I am just listing a few of them.

So, trying to name a general theory, along with the reasons for the strategy and the type of personality that it is trying to serve would help to organize our thoughts. The same could be said for each parameter: like when and who should roll versus closing out. A gambler might prefer one style and a person that takes frequent long vacations might choose another.
 

Nabire

New member
Well said. Personally when I undertake a neutral delta spread campaign I am very interested on the historical results. I'm sure we all feel the same way. I'm wondering if there's anyway we could run some backtests?
 

Nabire

New member
Rick's system: (Rick or Mark will need to correct as needed)
1. 50 days out open iron condor picking strikes which will each bring in $1.00 credit. That would be 2.00 total. When current profit reaches 50% of initial credit close out and take profits.
2. Adjust 1/3 of the position when a given threatened side has increased to about 1.3 times the original sales price. At that time roll threatened side out to sell a 2:1 ratio spread netting 0. So if you bought it back at 1.3 you would find a further otm strike around .65. Therefore buying one @1.3 and selling 2@.65 or so would leave you with the same short premium.
3. Adjust the second third of original position in the same manner when threatened side approaches 1.67 times the original sales price.
4. Adjust the final 1/3 when threatened side reaches 2 times original sales price.
5. Two times rolling out on the same side is max. Then close trade.

Additional strategies have been mentioned such as buying back unthreatened side and possibly rolling closer in to supplement the credit when making an adjustment.
 

Rick R

New member
Start the trade 45-50 days before option expiration day. If volatility is increasing go for the shorter time in the trade, If volatility is decreasing look at being in the trade longer. Collecting at least $1.00 per short on each the short side of the Iron Condor at 4.5 strikes plus from the current price. (As IV gets lower the open days will increase.)

A trade's short strike is in possible trouble when the value of that short strike is 1.5 times its original value ( $1.00 income current value $1.50). When this happens you want to consider increasing the trades width. Buying a 1/2 Back Ratio. This will increase the trades margin and value, rolling as far as possible, with additional income (the current short is 1.50 adjust to a strike that is valued of .75 or greater). The full position can be rolled, but at least 1/3 of the position should be rolled at this time. If one third is rolled the next third is rolled at 1.75 with the final third at 2.00.

If a third strike role of a trade's side becomes necessary, check the charts to see what is going on. You should consider closing this side and look for a possible reentry later in the trade.

This is just one way of doing the trade. You can also buy or sell futures contracts (/CL or /QM). These are the are the quickest way to collect 1000 to 500 deltas, plus or minus. (You will not have 1000 barrels of oil dropped in your front yard a week or so after the future expires.)
 

Nabire

New member
Start the trade 45-50 days before option expiration day. If volatility is increasing go for the shorter time in the trade, If volatility is decreasing look at being in the trade longer. Collecting at least $1.00 per short on each the short side of the Iron Condor at 4.5 strikes plus from the current price. (As IV gets lower the open days will increase.)

A trade's short strike is in possible trouble when the value of that short strike is 1.5 times its original value ( $1.00 income current value $1.50). When this happens you want to consider increasing the trades width. Buying a 1/2 Back Ratio. This will increase the trades margin and value, rolling as far as possible, with additional income (the current short is 1.50 adjust to a strike that is valued of .75 or greater). The full position can be rolled, but at least 1/3 of the position should be rolled at this time. If one third is rolled the next third is rolled at 1.75 with the final third at 2.00.

If a third strike role of a trade's side becomes necessary, check the charts to see what is going on. You should consider closing this side and look for a possible reentry later in the trade.

This is just one way of doing the trade. You can also buy or sell futures contracts (/CL or /QM). These are the are the quickest way to collect 1000 to 500 deltas, plus or minus. (You will not have 1000 barrels of oil dropped in your front yard a week or so after the future expires.)
 

Nabire

New member
Rick, In the Last sentence of the first paragraph of your post above you mention that as IV gets lower the open days will increase. By that do you mean that as iv gets lower you will need to open the trade at a higher number of days out? Or does that mean that you will need to keep your trade open longer?
Richard
 
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