A timely tidbit from one of contributing BoomBustBlog traders, Eurocalypse, basically an extension of what was expoused last week in Timely Trading Tips For 8/5/2011,which I excerpt:
I deeply hope your readers and yourself have benefited from the options strategies, market has been so quick; I dont know if it could be published in time.
...I'd recommend to take partial profits. Premiums have probably doubled or morewith the move and probable increase in vol. at this stage even the move is so violent we should have a very bad day at least until the opening of the US market today,waiting at least 1 hour after the opening seems wise.
I'd recommend to take some profits, after that because theta becomes expensive at this level especially with the weekend coming!
There are several ways to do it:
- Take off X% of the initial strategy to make it 0 cost,
- Delta hedge, and increase the delta hedge when market continues to sell off (thats the benefit of gamma) for naked options.
- If vol jumped already to stupid levels, sell some put spreads below the strong support levels indicated in the previous trade setups to make up for the initial premium with the increase of vol, you sell less options and you end up with a nice structure which can end in the money on both sides.
The probability of a total meltdown is here though so I'd keep some downside but no one ever lost booking some profits.
All subscribers are welcome to download this full document This is the introductory post to a series of trade setups for European Bank at Risk, complete with sample trade setups. Since then, my armageddon put trade has come a long way...
You see, although I feel we still have a lot to go, and I don't feel I put enough at risk before the market crash - contrary to popular belief, Greed is NOT Good. It's stupid. There's still the European bank run scenario that has yet to play out. On that note, a timely update from Eurocalypse:
Dont be a pig, if you have profits not taken now, I suggest one takes serious chips off the table. Hedge your gamma; better even resell options
people are bidding vol like crazy now.
That's the truth. Product is expensive as hell now, priced to the point where you can't make money!
There will be [other] opportunities. if the move down continues. Having profited from this downmove, you'll be among the few able to play for a violent bounce. Market is clearly oversold.
The risk/reward in being bearish AT THESE LEVELS and in the short term, is much much worse than when we opened the positions, so....make the rational choice and dont regret even if it continues. Being too greedy is bad.
We may know the end of the story, but even bear markets are not one-way...this has been a big run...
Actually, most of the big money in drastic bears such as 2008/9 came from single day collapses, with the balance being choppy trading, sideways action and rallies. It's difficult, but I believe that the key is to have exposure but to roll profits while continusouly feeding your coffer by removing gains, no less than 50% of the total, regularly and religously. Timing the market is fool's play, I don't care what anyone else says. Those that get it often are lucky, period! Luck runs out, guaranteed. It may seem that I'm prescient, but in reality I'm just objective and know how to count. In the end, it's still hard as hell for me to time this correctly, which is why there is now such a strong trading component in my fundamental and forensic analyses. As I write this, the rally in ES futures is fading from 17 to 7, as I anticipated. Still, curiosity didn't kill the cat. Greed did!
Coming up soon, more on European banks blowing up!!!!
What makes this so interesting from a subscriber perspective is that this bank is sitting under everybody's nose yet no one suspects it. KaBoom!!! Nuclear chain reaction thoughout Europe based on panic, greed, avarice and fear?
For those how haven't followed my bank run series...
- The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
- What Happens When That Juggler Gets Clumsy?
- Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
- Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year
- The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
- The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
- Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run
- Observations Of French Markets From A Trader's Perspective
- On Your Mark, Get Set, (Bank) Run! The D…
And the progenitor of the fundamentally flawed, but virtually guaranteed attenpt at a contrived equity rally...