... for a 2.44/contract credit.


Max Loss/Buying Power Effect: Undefined/6.94
Max Profit: 2.44
Break Evens: 31.56/36.44
Theta: 3.89
Delta: -14.41

Notes: Going where the volatility is at (again) in exchange-traded funds to sell a little August cycle premium while I wait for the September monthly to be more in that 45 days until expiration sweet spot. Recently, I've been taking profit in these short straddles fairly quickly (10% max) and then reselling at-the-money, but doing that here (and probably after this point) admittedly presents a marginal trade (10% max of 2.44 is .24).
Trade active: Rolling up the 34 short put to the 35 strike/going slightly inverted in the same expiry for a .33/contract credit on this up move; scratch at 2.77.
Comment: A small, instructional afterthought ... . When you invert, the max profit potential of the setup changes to the total credits received minus the width of the inversion (here, a one wide), so the max I can make on this trade at this point is 2.77 - 1.00 or 1.77/contract. Consequently, when inverting, you want to attempt to keep the width of the inverted setup less than the total credits received or, alternatively, work an inverted setup to a point at which the credits received exceed the width of the inversion.
Trade active: Rolling the Aug 17th 35 short put to the 36 intraexpiry for a .37/contract credit. Scratch at 3.14; max profit of 1.14 due to the now two-wide inversion.
Trade active: Rolling the Aug 17th 35 short put to the 37 intraexpiry for a realized gain and a .38/contract credit; scratch at 3.52 with a max profit potential of .52/contract due to the three-wide inversion. In all likelihood, I'll wait until most of the extrinsic has pissed out and then roll the inverted strangle back to a short straddle, assuming I don't get a sufficient move back toward the ITM short call.
Trade active: Taking advantage of this sell-off to roll the inverted out to the Oct 36 short straddle for a 1.17/contract credit; scratch at 4.69 (versus straddle value of 5.25). Just goes to show ... . Sometimes it's best to just leave things alone, be patient, and wait for a side approaching worthless to do anything.
Trade active: Inverting a smidge: rolling the 36 short call down to the 35 for a .31/contract credit to keep the setup at <30 delta long. Scratch at 5.00.
Trade active: Rolling the 35 short call down to the 34 for a .32/contract credit; scratch at 5.32.
Trade active: Yeesh. Rolling the 34 down to the 33 for a .40/contract credit, resulting in a 5.72 scratch point and a net delta of 24 long.
Trade active: Rolling the 33 down to the 32 for a .44/contract credit to maintain that <30 delta metric with the resulting setup being a four-wide inverted strangle (the 36P/32C). Scratch at 6.16.
Trade active: Rolling the 32 down to the 31 for a .46/contract credit to maintain that <30 delta metric. Scratch point now at 6.62 in a 5-wide inverted with delta at 21.53.
Trade closed manually: Covering here for a 6.42 debit, resulting in a small winner (.20/contract) for this broken setup.
Great analysis, Naughty. This is a good example for the young'ns to follow.
@Benji, Patience with these setups is the hardest thing to learn ... . Aggressive delta balancing: it'll smooth out your P/L, but at the cost of getting you into goofy setups that may have a decreased likelihood of success.
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