Week 18 - May 4 Option Trade / Banking Crisis
- Trade Confirmation - May 4
- Explaining May 4 "6" SPY Iron Condor trade
- Short-term directional bet
- Current Markets / Banking Crisis
- Why do I love options?
Trade Confirmation - May 4
Explaining May 4 "6" SPY Iron Condor trade
In the first 90 minutes of trading, I rolled the existing call legs of my "6" Iron Condor (Jun 30). Why do this? My current risk is about a 10% chance of losing. I wanted to add more risk on the CALL side of this trade, bringing it up to about a 17% chance of losing.
Why add more risk? If I did nothing, I believe the call side would expire worthless. The other factor is there might be more risk on the PUT SIDE in the coming two weeks as the markets look weeks due to FED HIKE and the current banking crisis.
Short-term directional bet
In my view, I believe there is more short-term DOWN side risk coming up. That will alter my IRON CONDOR position. If the MARKETS are going down, the CALLS SIDE will continue to lose value, so I wanted to add some risk on the call side.
In the end, the perfect winning position is that the MARKETS stay in a range between the short LEGS of my Iron Condor (350/438). I will close my position when either side gets tested, or will theta decay causes both sides to lose value.
Current Markets / Banking Crisis
Currently, the markets are RED, and it feels like it wants to continue downtrending. If more REGIONAL BANK is at risk this weekend, that will cause the STOCK MARKET to lose confidence in our current banking system.
First, it was SVB Bank failure. Then Signature Bank failed. This week was First Republic turns. Next up looks like PacWest Bancorp (PACW)! When is the next shoe to drop? Who is the next shoe? How many more are there? 10, 20 or 30 banks? Or are we at the end of this banking crisis?
Why do I love options?
Options trading can be simple or complex and everything in between. There are so many ways to use OPTIONS.
I use it in various ways:
- I use covered calls on my long-term buy-and-hold dividend stocks.
- I use options to bet on both directions; selling options.
- I use options to hedge or to reduce some risk.
- I use options for protective puts (or locking in some gains).
- I use options to make money on Theta Decay.
- I use a mix of these methods at any given time.
There isn't one right way to use options. I use it to make money when markets are flat or down. How do you use options? Let me know.
Have a profitable day,
Solving-Chaos