Options Trade #36 - SPY Tactical Strangle

Updated: Sep 10, 2019


VTS Community,

Today is just an adjustment day on a few open Discretionary Options Strategy trades.  This is a very normal process because a large part of options trading is risk management.  Adjusting positions is very common. 

1)  The SPY Tactical Strangle will be moved a few strikes up to centre it closer to today's price.  Strangles are among my favourite trades because they profit very well when markets go down, and they maintain value when markets are going up.  So in the end they are a great way to play both sides of the market, and patiently wait for a normal correction.  I don't ever try to "time" market declines, but with Tactical Strangles you can maintain positions longer and often times catch a downtrend. 

* So I'll close one, and re-open a new one centred closer to today's price.

** If you know how to "roll" option orders you can just do that.  Otherwise, closing one and opening the other is easy.

SELL to CLOSE 1 x 18 April 19' SPY 255 Put SELL to CLOSE 1 x 18 April 19' SPY 283 Call - when selling strangles, the higher the price the better

(then)

BUY to OPEN 1 x 18 April 19' SPY 265 Put BUY to OPEN 1 x 18 April 19' SPY 285 Call - when buying strangles, the lower the price the better



2)  The SPX Iron Condor will be closed.  Now it's not nearly at the stop-loss yet, it's only down slightly so you may be wondering why.  If you recall, here's what I always write for the stop-loss section for Iron Condors:

"I don't use hard stop-losses for Iron Condors.  Instead, I have developed a proprietary method of measuring the risk-reward profile day to day and determining if it's still advantageous to remain in the trade or close it."

One of the input variables to my calculations that may cause me to close trades, regardless of how much it's up or down, is how close it gets to the short strikes.  The current open trade is hanging in there very well value wise and has benefited a lot from declining volatility, but it's currently too close to the short strike so it needs to be closed.

SELL to CLOSE 2 x 15 Mar 19' SPX 2400 Put BUY to CLOSE 2 x 15 Mar 19' SPX 2425 Put BUY to CLOSE 2 x 15 Mar 19' SPX 2850 Call SELL to CLOSE 2 x 15 Mar 19' SPX 2875 Call - when closing iron condors, the lower the price the better

For anybody not following this strategy, remember you can always open a paper trading account and follow along risk free.  I realize for some people, those trade instructions look complicated.  Honestly though, it's just because I like to be very thorough in my explanations.  Actually, these trades can be executed very quickly and easily once you get the hang of it.

So consider a paper trading account, and feel free to ask me as many questions as you like in building your confidence with options trading.  I'm here to help my friends  :)



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