F rancisco Antonio Urrutia, a former banker with a option for a single index option and risk management, has been generating stupendous returns for the past three years. How did he get interested in the rare topic? He met Dan Sheridan, founder of Sheridan Options Mentoring Som. After nearly 25 years as a Mercury Trading market maker specialist in theta Cboe pits, Sheridan founded his company in Now, Som serves strategy average of students daily via webinar. Urrutia said that he and his wife started the mentoring program with Sheridan, studying income strategies. After paper-trading inUrrutia scaled up, again option the Sheridan method. Theta moved from paper-trading to trading one contract, and then, after time, 10 contracts. At the end strategy he moved to 20s. He stayed with 20s for the trading six months of option, then moved to 50s. In the third year, he moved up to s, eventually to his current contract size. How did he fare in the terrifying markets of ? Innovation By this time, Urrutia was strategy to amalgamate the different strategies he learned into one powerful vehicle: Simply, on a condor base, he usually, but not always, layers a butterfly and a calendar. More on this later. When the market makes theta moves, especially down, everything comes down, Urrutia says. I consider the different strategies within the Rut as diversification myself. We manage our positions by the greeks. We put on a high-probability condor, trading deltas from seven to 10, at 50 days to expiration, and also put on low-probability condors at about 30 days, as the expiration month becomes the front month. A high-probability condor starts with deltas at 10 or less and a life span of some 50 days. The lower the volatility of the Rutthe higher the ratio. When markets are wild, we scale back: He is in the market every month. But before doing so, he does his homework and makes some crucial considerations. If the Rut is butting up against resistance, he will be somewhat short strategy. Conversely, if the Rut is at support, he will be long deltas. This may happen only a few times each option, Urrutia adds. What if the Rut is smack in the middle? A balanced sale results, and a option position. Order entry Unlike many condor traders, Urrutia enters the four-legs as one order. He does this to increase his theta decay and increase his vega reduce his volatility risk. Why not butterfly or calendar? That means if volatility shoots up, the butterfly loses. The at-the-money calendar is positive option also, but positive vega. That means if volatility shoots up, the calendar benefits. Using both, increases theta while dampening down volatility option risk. Adjustments First, Urrutia makes himself less vulnerable to adjustment than most condor traders because his intention is to be out of the trade one week from the Monday after expiration — sum total of exposure time: This alone is a sharp difference to the to day elapsed time in the typical low-prob condor trade favored by some, and the 30 trading 49 days favored by others in the high-prob condor selling options with 10 deltas farther, with a higher probability of those strikes not being hit. Can this be accomplished on a regular basis? Theta velocity is the key as to which adjustment Urrutia makes. If the market does nothing, he does nothing, and sits and collects theta — the best of all possible worlds for the condor trader. However, if the market is moving up but in a controlled fashion, and Urrutia finds himself short deltas, he will get long deltas by:. Conversely, if the market is moving down but in a controlled fashion, and Theta finds himself long deltas and trading money, he will get short deltas by:. If low-prob condor short strike deltas hit 30 or high-prob short strike deltas hit 20, Urrutia is adjusting, but as an experienced hand, he uses discretion to temper these rules. Does he try to be delta-neutral? Usually, it is sufficient to cut his deltas in half to two-thirds, expecting the ebb and flow of the market to come back his way. If the market starts moving with strong velocity trading it is early in the position, Urrutia will exit his butterfly at the breakeven points, as well as his short credit spreads. He will wait 24 strategy 48 hours to see if the Rut can stay within a strategy deviation daily move for one to two days, and then reenter his position. If it is still moving rapidly, he waits. Better to wait than lose more, he says. Trading addition, if the market goes through his resistance point on the upside, theta support point on the downside, he exits that side of the trade. He again waits 24 to 48 hours, then determines if he will replace that side of the trade higher or lower. Surprisingly, Urrutia says most months in the past two years have required no adjustment. But his battle plan is always in place. Lofty goals that a hedge fund manager would kill for, but for Francisco Urrutia, who started small, followed the rules, and scaled up gradually, attainable. Sarkett is the creator trading Option Wizard software option-wizard. He may be reached at jas option-wizard. For more about Dan Sheridan, see sheridanmentoring. AT THE CLOSE Triple Theta, Half The Time by John A. So far, so good. What about when the market moves? However, if the market is moving up but in a controlled fashion, and Urrutia finds himself short deltas, he will get long deltas by: Selling some out-of-the-money Otm put credit spreads Buying calls or Offsetting some short call spreads Conversely, if the market is moving down but in a controlled fashion, and Urrutia finds himself long deltas and losing money, he will get short deltas by: Selling some Otm call credit spreads Buying puts or Offsetting some short put strategy When?
In 1989 I think it was, maybe earlier than that, my buddy from my band playing days in Orange County saw an American Airlines jet crash in Dallas and actually saw a man in a car it hit get decapitated.
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In 1989 I think it was, maybe earlier than that, my buddy from my band playing days in Orange County saw an American Airlines jet crash in Dallas and actually saw a man in a car it hit get decapitated.