Monday, June 29, 2015

First Update for the August M3


      Today, there was a huge drop in the Russell 2000 underlying index. Beginning at 1,269 when it first opened (last close was at 1,279) it crashed another 20 points and closed today at 1,246. Because of such a delcline, the volatility of the index was up about 25% causing my position to suffer from my negative Vega. Luckily, before I put my position on for the August trade, I noticed a steadily rising market and I had a feeling it was going to fall soon. Knowing this, I placed my butterfly at 1,250 rather than 1,260 to have extra support in the back, which is crucial.

        When I checked the position, I saw that all my Greeks were within limit and was only down $340. When I saw the risk profile, I noticed that my t + 0 line was flatter then I thought it would be. I have attached a picture of it below.


Saturday, June 27, 2015

August M3


       Yesterday, I put on my simulated August M3 trade. For those of you who don't know what an M3 trade is, it is a strategy that consists of buying 20 put butterflies hedged with a long call. Generally, you put on 20 butteryflies but as long as the ration 20:1 is consistent, you could put on as many as you would like. The butterflies are placed 20-30 points below the current market position with a 50 point wing span. I like to buy a call that has enough Delta to bring the overall Delta value to -5 but if not I would buy a lesser Delta call and add verticals, like I did with the August M3. I prefer closing the position when it reaches 21-17 days until expiration because of the high Gamma trend but I can also close it if there is a high profit or loss.  Again, all credit for this strategy goes to John Locke and I appreciate that he is willing to share his strategy with the rest of the world.

       Below are the current Greeks and risk profile graph of the position. As you can see, the t + 0 line is flat, which is something I want to maintain throughout the trade. I will be posting any updates of the position when I add verticals, move the butterfly or close the position due to high profit or loss.



Monday, June 22, 2015

My Options Science Research Project


         Here is my science research project which I presented at the annual Virginia Junior Acadamy of Science this year. The project is mainly focused around the importance of option Greeks when trading an option position. It is titled The Effect of Dynamic Controll of Stock Index Option Greeks on the Profitability of an Option Position. Even though I didn't win any award, I was thrilled at the opportunity to spread the knowledge of option Greeks. Hope you enjoy it!










Introductory First Post

       
             Hello! My name is Prachi and I am a fourteen year old living in Virginia. I have been learning about options for two years and I have grown to love it. I even used options when conducting my science research project during the school year. If anyone is interested in that, I will have it uploaded on the blog as well. Everything I write or share on this blog is credited to John Locke since I am using his option strategy (M3). If anyone wants to visit his website or blog the link is as follows: https://www.lockeinyoursuccess.com/blog/. It has lots of outstanding information on options and option Greeks as well as his other strategies.