OPENING: VXX DEC 20TH 16/18 "ZEBRA"
I've dicked around long enough waiting to put something on at or near VIX lows, and I like this particular setup here, although I obviously didn't catch things at VIX lows.
Metrics:
Max Profit: Undefined/Infinite
Max Loss: 3.03 ($303)
Break Even: 17.51 versus 17.57 spot
Delta: 98.9
Theta: -.83
Notes: With the classic "Zebra", you're looking for a setup in which the short option "pays for" all of the extrinsic in the longs, resulting in a break even at or below where the underlying is currently trading. Given the delta metric, you're basically in synthetic long stock. The max profit is "theoretically infinite," with the long call vertical aspect of the setup converging on max at >18 and the additional long call converging on an instrinsic value where the underlying is trading.
Naturally, a monstrous pop would be nice, but will probably money, take, run at the earliest opportunity. From a trade management standpoint, this is basically "unmanaged" -- i.e., it works or it doesn't ... .
Metrics:
Max Profit: Undefined/Infinite
Max Loss: 3.03 ($303)
Break Even: 17.51 versus 17.57 spot
Delta: 98.9
Theta: -.83
Notes: With the classic "Zebra", you're looking for a setup in which the short option "pays for" all of the extrinsic in the longs, resulting in a break even at or below where the underlying is currently trading. Given the delta metric, you're basically in synthetic long stock. The max profit is "theoretically infinite," with the long call vertical aspect of the setup converging on max at >18 and the additional long call converging on an instrinsic value where the underlying is trading.
Naturally, a monstrous pop would be nice, but will probably money, take, run at the earliest opportunity. From a trade management standpoint, this is basically "unmanaged" -- i.e., it works or it doesn't ... .
Trade closed manually:
Money, take, run ... on this pop. Covering for 4.43; 1.40 ($140 profit)/setup.
Comment:
Correction: Covering for 4.33 (1.30/$130 profit).