Important Trade Updates

Hi Steemians,

markets are selling off nicely today.

Here's the /ES:

source: tastyworks


And here's the /NQ:
source: tastyworks


VIX is exploding, but from a low basis

source: tastyworks

Since we are short lots of vega, we can be thankful to also have short deltas on.
Higher implied volatility is what makes options expensive.
Now you know why it's important to hedge your vega risk with short deltas in a 2:1 ratio (vega/delta = 2/1).

I had to make some adjustments:

Butterflying off the QQQ 162/165/185 BWB:

Our QQQ BWB was trading only for 67 cents

source: tastyworks


We collected $1.93 in net credit for this trade.
To butterfly it off, I bought the June 168 call and sold our long 185 call for a net debit of $1.10

source: tastyworks


So we locked in a profit of 83 cents ($83 per one lot) and now have a free long butterfly on, with the potential of making $3 ($300 per one lot), if QQQ closes at 165 at expiration.

source: tastyworks


Since we still have lots of vega risk due to our short stranges/straddles, we need a new hedge.
So I sold to open the QQQ June 161 naked call for a credit of $4.10.

source: tastyworks


The buying power reduction for this trade was $3,175 when I opened the trade.
It is already a small winner.

The other positions are doing fine at the moment, but if we get more downside, I will have to roll down our 162 call in IWM to the 152 strike to reduce deltas and collect more credit.
But as long as the 152 short put doesn't get hit, I sit and wait.

I wish you all good luck trading these great markets.

Stephan Haller

Legal disclaimer: These are not trade recommendations. Options involve risk and are not suitable for all investors. The trades shown above are for educational purpose only.