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Looking for guidance // Sheridan Options Mentoring, SMB U or John Locke?

Discussion in 'Options' started by TheSpeculator152, Jan 3, 2016.

  1. Sanjeev B

    Sanjeev B Member

    I just want to acknowledge the contribution of every member to this thread. The reason being that this is the thread that pulled me to Capital Discussions site.
    Around a month back I was searching for reviews of Sheridan options mentoring and this thread popped up. I have spend some time reviewing & absorbing the wealth of information on this forum in last 30 days. I have realized that even before I engage a mentor , I need to have proper foundations of options. I will be working on the foundations during the next 30 to 60 days.
     
  2. status1

    status1 Well-Known Member

    I would say that is part of my problem
    I would like to make one but I am not sure where or how I should to start
    Does anyone here have a flow chart or some basic flow chart that someone can start from or just an example of how it should look ?
    It's difficult for me to settle on just one strategy when there are so many good ones to choose from and can be tweaked for my personality
    Does the flow chart include or should include things like volatility or what type of trades to place in a certain volatility
    how close/far from ATM and how many DTE ?
    Or is the flow chart all mechanical doing the same type of trade the same way regardless of the market conditions ?
    If it's done based on the market condition than I imagine it would be more difficult to do because it may work for a while as the market conditions stay the same but when the markets change the trade no longer works so I have to modify my trade and therefore the flow chart so I imagine it's difficult to make a static flow chart that works on all types of market conditions
    By the time I find a trade that works for me and starting to be consistent the market changes and than I have to adapt and change my strategy since my existing strategy no longer works
     
    Jack likes this.
  3. ACS

    ACS Well-Known Member

    Your flow chart could start with a question or questions about the current market conditions. For example Jim Riggio starts his Kevlar trade in two different ways depending on market action. From there the chart could branch out into two or more starting configurations. After entry then the next branches would be for adjustments and then exiting.
     
  4. Harry

    Harry Well-Known Member

    Re status1 comment above ... adaptation is always going to be a need.
    Flowchart: I think you can write a flowchart that has 100 or 1000 steps but such a flowchart will be hard to maintain as market changes. You need something simple, maybe a 5 step flowchart. For me, that is a checklist. I do not want to share a document I have as it is badly written and after 50 edits, there are some part that are fleshed out and some that are completely 1-liners. However, let me talk briefly about this checklist : my context is vertical credit spreads.
    #1. Order placement. When to place an order, what instruments, spread width, what size (# contracts), what deltas, typical credit, high credit, low credit (do not go below). This is pretty static 1 time definition but I do keep on adjusting some values (deltas, expected credit, low credit) based on what I am learning month to month
    #2. Automatic closure orders +. Also write down your max loss and adjustment points. This is a much smaller section and actually part of 1 above, but it helps to have it written down. The reason I separate this is because #1 is past #2 is current and future and today I do not care about what the starting delta was, I may care about what the deltas are now.
    #3. Daily Review: Is there anything that needs to be adjusted because of expiry (dont want to hold till expiry date, dont want to hold till expiry week, want to close 15 days early ... whatever be your need)
    #4. Daily Review: Is the position in danger because of price movement? If yes, is it orange (hold but adjust tomorrow if it continues to hurt), or RED (adjust right now). Even if you do not know how to handle the current situation, you need to look at every single position ... very important when you have 3 or 7 or 10 positions ... and do a gut check and say : is it within bounds?
    #5. List of adjustments. Of course you may have a list of 95 adjustments, and if you do, then categorize and write them all down. You can decide to make it as complex as possible, but for a simplistic one, just track the # times you have actually used the adjustment. Having the list also has the additional benefit that when you are making the adjustments, you do not neglect something that you tried once but may be very useful now. As part of this you can also list tactical closures, early closures ... whatever makes sense to you.
     
  5. Harry

    Harry Well-Known Member

    On thinking again, I think you can revise the checklist to add one more review point
    #6. Daily Review: VIX / volatility / IV based. I do not generally look into this, but may be relevant for others.
    So you have 3 review points everyday: time, price or volatility, and for each of these, you should be able to make a call: hold, or fold, or adjust
     
  6. Al G.

    Al G. Well-Known Member

    If you are trading SPX, VIX Central is valuable to look at Daily, it will tell you the market is in Contango (over 95% of time) or in backwaradtion (Front month Vol is higher than back month Vol). In my opinion if market is entering backwardation, you need to be properly hedged, there is fear out in the market.
     
  7. status1

    status1 Well-Known Member

    Is this something I can look at on TOS or only on VIX Central ?
    Is the front month the next month coming up or the current month that we are in ?
    Looking at the implied volatility on VIX on the right side on the trade tab it looks like all the months going forward is lower and lower in implied volatility
    Does that mean it's in Contango or am I way off the track ?
     
  8. Teddy

    Teddy Well-Known Member

    Go with CapitalDiscussions. These guys came from SOM. I personally liked SOM until the folks in CD left.
    I started with SOM, but found that there were a few smart guys in the trading groups who later disappeared. I had to resort to watching the old recordings before finding CD. These guys all left to become CapitalDiscussions.

    The Weirdo/Jeep that SOM teaches came from Dan Harvey who is in CapitalDiscussions.
    The put fly that SOM teaches is morphed from Dan Harvey's RoadTrip.
    The Iron Condor and Calendars (I hate this one) are quite generic and I'm not sure if one can be quite consistently making money with them.

    SOM's teaching model is old and like the folks said it used to be the only one available out in option education. There are more choices now. I did have an issue with my mentor so I have a huge bias. It was either the time zone, my accent, or just a personality clash. The comments made were in the last mentoring session if it is still stored and not suddenly deleted.
    I left SOM because of the annual fee. I just could not handle that. :p
     
    Last edited: Oct 6, 2017
    PK likes this.
  9. Sanjeev B

    Sanjeev B Member

    Thanks for your input Teddy. My though process is that I should reach a certain level of theoretical competency on options & options back trading before engaging a mentor and currently I am working on it. Also the timezone difference between USA & Singapore is another consideration. Having 12 to 15 hour time difference is not going to make things easy for me.
     
    Teddy likes this.
  10. Teddy

    Teddy Well-Known Member

    For beginners, Kevin Sass has a beginner's group #3 meeting normally after the market close.
     
  11. status1

    status1 Well-Known Member

    This is more for myself but others could use it or probably know it already
    This is kind of an open ended question and it's probably depends on the individual trader
    What about taking profits ?
    Should this be on the flowchart ?
    The main question I struggle with these days is when to take profits ?
    Is there a kind of rule of thumb or a minimum percentage gain on margin where a trade should or could be taken off ?
    Of course each trade is different (at least for me) but it seems like the trade works for a while than the market takes off and than the profits slowly evaporates
    I was wondering if there is a point where the maximum gain has been made for that particular trade and any further gains will be smaller and may even loose some of the gains
    Ideally if I knew where that point is I could close that trade early and open a new one further up rather than wait for the market to come down or for time decay to take effect on theta

    Speaking for butterfly trades it seems that as the market moves up past the upper wing the t+0 line stays fairly flat
    and only moves up dramatically close to the last week of expiration and only near and inside the tent So when entering a trade with 72 DTE for example after about a month or so of the market moving up I could close the trade and place another one further up closer to ATM still at 72 DTE where most of the gains are made this way I could place 2 trades in 72 days where 2 trades with smaller profits per month could add up to more profits that I would make if I was going to wait for the full 72 days

    It's sort of like taking the profits on the short put spread at let's say 50% or 80% of max gain but applied to butterfly trades but make it as a percentage of margin So if let's say I already made 1% on margin in one month and the market is up about 40-50 points from my upper wing I am thinking it may be better to close the trade at that point and open another one further up rather than try to adjust it at that point which may increase profits but also raise the margin so it's just a trade off at that point

    So that is my main question What is a good percentage number to shoot for that can be reasonably easy to achieve
    in one month ?

    For example I have one trade that I opened on 8/21 with 59 DTE and by 9/21 I was up $450 on 13k margin which is not bad considering the market was up 60 points past my upper long so that is 3.4% or 41% annualized but of course I did not make any adjustments so now with another 50 points on top of that and only 2 weeks to expiration I am only up $175 which is 1.3% or 8% annualized So clearly there is an optimal point where the trade can be taken off I am just not sure if there is a method to calculate where that is other than just eyeballing it or maybe take the SPX average or annualized gain divide it by 12 and if the trade meets or beats that than take the trade off

    Sorry about the long post but I think this is an important part of a flowchart or decision making
     
  12. td80

    td80 Member

    I should preface the following with the assumption we are talking about a BWB / RTT type of butterfly:

    You don't really need to increase margin, rather than just bringing down the upper long, you can do a reverse harvey X amount of strikes and keep your margin the same or less than opening margin. Doing enough of a reverse harvey, at the right time and symmetrically, will bring in positive deltas and get your upside risk under control.

    The t+0 line and greek ratios can guide you, namely you want a fairly flat t+0 and adjustments are done to make that happen, however in some cases further adjustment will not yield an acceptable risk/reward or upside result at which point it is time to close the trade and open a new one. Sometimes that happens at a loss, sometimes it happens a +3%, sometimes it is +25%, it is tough to assign a static % at which you should walk away, each trade as you said is different and the market giveth and taketh away. Maybe someone has come up with a % gain to walk away vs. current IV level, but there are so many variables involved if that person has any adjustment strategy at all that it may not be applicable to how you trade...

    This is where experience comes in handy, and what can help with discipline is having a lot of little trades on such that you don't feel compelled to try to squeeze the last drops of blood out of the stone when it is obviously time to exit and begin anew.
     
  13. status1

    status1 Well-Known Member

    Thanks for the reply
    I realize this is not easy and there is no static figure that would work all the time because there are a lot of variables plus I am not doing strictly RTT trades I am doing some combinations with butterflies and condors
    I looked back over my trades this year and most of the time I had gains from 1.3 to 25% after being in the trade for 30 days and a lot of them ended about the same or lower with only a few that ended higher and some that turned into a loss

    I am sure if someone does a study they can come up with something
    I am sure there is a relationship between the distance from the upper long and the DTE where the trade is no longer efficient The gain by the short put is overpowered by the loss on the long put not to mention the low vol
    I am thinking to start with a 5% gain or 30 days whichever comes first than I will try to find out if there is a certain distance from the long where this occurs
    Obviously if the market was more volatile and came down once in a while to give us a chance at some decent profits we would probably not even talk about this issue
     
  14. Harry

    Harry Well-Known Member

    I think you should absolutely have a profit target but should it be a hard target encoded in closing orders? Absolutely not!
    Also can you have a fixed profit percentage irrespective of strategy? Once again, absolutely not.

    You should decide profit target based on the strategy - high probability iron condor may have a different profit target than a low prob one. A BWB may have a different profit target than an M3 or an RTT. The profit target may be based on margin at risk, or just based on credit received. It varies. You should also feel free to adjust based on your reading of the market, VIX and what not. However, you must define the profit target when (or before) you place the order and once the order is placed, all you are doing is to manage the situation in terms of either optimizing it for more profit OR optimizing it to lose less.

    Should you exit at the profit target? Its your call. I do not like hard closing orders and can not monitor intraday so I do check my trades once a day, and I "try" to place closing orders well beyond my profit target so that the order entered in TOS shows me (in one glance) what the current price is, and I can always adjust my order to take the price being bid, or let it run another day or week. This does mean that you will miss out many order closures as the price moves around a bit, but I am used to it - someone else may want hard closing orders and I think it works equally well.

    Now if you have already met your price target, should you stay or exit? Why not both !! I am sure you do not have a single contract with a 13K trade - close some and let others run. Once again, if you did not have a profit target, it is hard to say what to close (even partially) and when, but once you had a target, start closing some contracts to lock in profits so that when it whipsaws and you reduce your profit OR even if you get into loss, it is not on all contracts.

    Should profit taking be part of ruleset? Yes.
     
  15. status1

    status1 Well-Known Member

    I know what you are saying about having different profit targets and I agree with that I am just thinking in the terms of the current low vol market it seems that the bwb and condors I am doing is not as profitable as last year and I am trying to place trades that don't need a lot of adjustments so I am slowly gravitating toward having the upper long in the profit zone already when I put on the trade so I should have a guaranteed gain on the upside

    Of course that means the t+0 line is tilted down and that's not good but in this low vol market I don't see it going down at least not until the fed does something with the interest rate
    I just have one trade like that for now and I can't raise the upper long since I am pretty high on margin but in about a week or so it will be 30 days since I placed the trade and SPX is up 50 points from where it started and it will have already made 80% of the credit I received
    I could get a little more than the credit but I will have to keep it longer or just close out the shorts leaving only the longs if there was any hope that the market may go down but at this point it's not likely
    So I am thinking it may be safer to close it down and take profits and open a new trade further out in time
     

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