I put on this trade today around 1:20 pm central time in Sheridan TV. I bought 1   2560 C , S 2  2590 C,   B 1  2615 C,  for an  $11.90 Debit. SPX is trading at $2589 and I am trading the Dec 1 Expiration, 15 Days out.

4 Step Risk Management Plan

Step #1     Set Up:  Sold ATM Call 2 times, Bought the ITM call, 30 points lower than the ATM call, and also Bought 1 call 25 points higher than the short call. My beginning position Greeks are about short 4.34 Deltas for every 1-2-1 Butterfly. Shorter than I normally do , but with the market so high already today , I decided to be a little shorter when starting. This just means I would adjust quicker on the upside than the downside.

Step 2     Profit Target and Max Loss-  8-10 % profit and 10-12% Max Loss on Capital in this example of around $1190, my debit. Would have order in to sell Fly for $12.80 or $12.85 for profit. If the Spread value went under 10.70, would get out

Step 3-  When to Adjust?  Downside: 2570.  Upside:  2600

Step 4-  How to Adjust?  Roll the short call up ( upside adjustment) or short put down (  downside adjustment), by 5-10 points to reduce the position deltas 2/3.

  Dan Sheridan 

dan@sheridanmentoring.com

With SPX  at  $2588, I put on an SPX Double Calendar. Here is the 4 Step Risk Management Plan

Step 1: Set Up:  B 1  Dec 8  2600 C, B 1  Dec 8 2560 P,  S 1  Nov 24  2600 C, S 1  Nov 24  2560 P,  $15.20 Debit. Short Strikes  17 Days from Expiration and Long Strikes 31 Days from Expiration. Started my Call Calendar up about 12 points from the current price. Put Calendar was 30 points below the current price.

Profit Target

Step 2:  Profit target and Max Loss: Profit Target 8%, would sell out Double Calendar for $16.40 Credit. If the Debit of the spread goes under $13.80, would sell out Double Calendar for about a 10% loss at $13.80 or $13.70 Credit.

Step 3:  When to Adjust?  Upside, around the short strike of the calls. Downside?  Would look for a possible adjustment the first 2 days of this trade, about 10 points from the short put strike.

Step 4:  How to Adjust?  Upside? Take off the Put Calendar  Downside?  Take off the Call calendar

With SPX at 2591 at 11:48 am central today, took off Double Calendar Trade from Friday for $17 credit, about 4% yield. Why did I take off the trade early? Got a little impatient with this quiet market that I don’t think will last,  and a 4% profit in 1 trading day.

Got into the Double Calendar Trade Friday for $16.35 Debit. How did it make 4% in 1 Trading Day? Daily theta on this trade was almost $60 for 1 contract, benefit of doing a 17 Day Trade. For more details on original trade, scroll  to Nov 3 Blog.

Dan

dan@sheridanmentoring.com

Today , around 12:15 or 12:30 central, I did this trade in SPX: Buy 6  Dec 8  2600 C, Buy 6  Dec 8  2555 P, S 6  Nov 20  2600 C, S 6  Nov 20  2555 P, for $16.35 Debit. The long is 35 days from expiration and the short is 17 days from expiration. SPX was around $2586 when I did this.

Beginning position Deltas are near zero, the Theta is 38 and the Vega is 1277 ( 6 Contracts). For 1 contract, the capital required is the debit of $1635. 6 Contracts in this example would be about $10,000.

Dan’s 4 Step Risk Management Plan

1 Set up : Long Expiration 35 Days out and Short expiration is 17 days from expiration. Start position deltas near zero. Call Calendar is about 15 points up from current price and Put Calendar is about 30 points down from the current price.

       2 Profit target and Max Loss: Looking to make about 7-10 % profit and not lose more than say 10%. I bought the spread at 16.35 debit, so I would sell out for around $115 profit for each 1 Double Calendar, or a credit of about $17.50 for the Double Calendar. If the Double Calendar Debit starts going under $14.75 debit, would get out for a loss of around 10%.

       3  When to Adjust? Would look for a possible adjustment at either the short strike on the call side, 2600,  or 10 points before the short strike on the downside, that would be 2565.

        4  How to Adjust?  On the upside, I would take off enough Put Calendars to reduce my position Deltas ½ to 2/3.  On the Downside, I would take off enough Call Calendars to reduce my position Deltas ½ to 2/3. If the SPX was up or down close to 1% in the SPX at the time of Adjustment, would buy a put or call to reduce my position Deltas ½ to 2/3.

Note: Beginning Traders or those who haven’t done 10-12 Double Calendars live, keep it simple and only do Step 1 and Step 2, that would mean you are doing no Adjustments.

Dan Sheridan

dan@sheridanmentoring.com

Below, is a trade that I put on earlier today in a live webinar for Ally Invest.

Sell 1  Nov 24  2605 SPX Call  ,  Buy 1  Nov 24  2610 C,  $1 Credit. SPX at $2571.

4 Step Risk Management Plan

Step #1    With SPX about 12 Points off of the all time highs, thought it appropriate to do a Call Credit Spread in SPX. Sold a Call at a 20 Delta and bought a call 5 points further out-of-the-money. The risk is $400 for every 1 spread (risk of $500 minus the $100 credit). I filled this trade live at 11:35 am with SPX trading at 2571.

Step #2   Profit Target and Max Loss.  Profit Target is about 10%. We will buy back the trade for .50, half the credit in this example. Max Loss is 15%. If the $1 Credit goes to 2 .00, we will take off the trade for a $2.00 Debit or a loss of $1.00 on the credit spread, down 20%.

Step #3  When to Adjust ? and Step #4  How to Adjust?  Not applicable here because we are simply going to take off for a profit or loss and won’t be dealing with adjustments for this trade.