Lesson Overview

Options Expiration Week Position Checklist & Guide

As you near options expiration week, you'll need to make some decisions on positions that are "on the fence" and either need to be closed or rolled to the next expiration month. This checklist and guide will help you though through all the options you have at your disposal.

Show Video Transcript +

In tonight's video update, we're going to go over the trades we made on Friday on the ninth, and then also today on Monday, September 12th. Both of these trades are going after our new low volatility options line strategy. If you're new to option alpha ...

Because I know we had a lot of people sign up over the weekend ... If you're new to option alpha please go back, I think it's four or five videos now, to our original SPY position. Just right here in the video update page. You can check out kind of like our whole game plan going forward for these low volatility strategies.

It's been something we've been testing now for a long time. We're starting to actively trade this because there's been promising results from our back testing. With the case of IYR, on Friday, there's a real estate ETF and like I said in the video update and the strategy call with members over the weekend ...

With the lead members over the weekend. With the markets dropping so fast on Friday, this is a really good position to get into because it really kind of leveraged this quick jump in volatility. Even though it wasn't high, like real high, volatility was coming from a really really low area.

If we just go to the chart here of IYR, you can see volatility was down, like low digits, like 10 or so, and then jumped up to 30 something that day. That was really good after the big drop down that IYR had. What we decided to do was, again, do this iron condor wide, about four dollars wide on each side.

So, selling the inside legs at the 20 deltas, so still sticking with that 20 deltas approximately. Then that would leave us with the 84 calls that are short and then the 75 puts that are short. Then we went out four dollars on either end and bought protection cheap. You notice that the call protection was cheap.

The 88 calls were about five bucks. Put protection naturally was a little bit more because most traders are buying that kind of protection further out as the stock was dropping on Friday. All in all, we still ended up with a 68 dollar credit for a four dollar wide spread.

A little bit lower credit that we usually take in on just like a regular high implied volatility iron condor. Again, some of the back testing that we've already started doing. 21 million different strategies, we're starting to see promising results from even still doing these during this low volatility time.

We're still doing it small; we only made three contracts here. We're doing these about 45 days out. It's kind of like the sweet spot. 40 to 45 days out is the sweet spot. Again, with IYR, we're really just trying to pin the market in this range here.

You can see our position ... Let me just actually go to the trade tab here so you guys can see our position here in IYR ... Again, like I said, we are in October now. We went ahead and sold the 75's. That's the inside strikes here. Then on the top side the 84's, those were the insides.

Then we just went four dollars out on either end. That just makes it really simple, really clean. When we entered this trade originally, it was a little bit bareish and skewed. That wasn't anything we did, that was just because of where the market was at the time.

Now that IYR actually popped up today, our position is actually pretty balanced. It's a little bit bareish and tilt still, so we'd love to see IYR move just a little bit down but you can see our payoff diagram is pretty balanced right now. Even if the stock moves another ...

Has another day like it had today, we'd still be okay, position wise as we head into October. I think volatility might contract a little bit and even if it expands, we might continue to add to this position in the future.

The other one that we got in today was XLU. We do have a current calendar spread going at XLU. We'll probably try to get out of this one this week. This XLU position is just a stand alone October strangle position.

Again, we just wanted to start adding some premium in here while volatility remained a little bit high. Even though the market rallied today, had a big strong rally, which sounds. I was too surprised about. I talked about on the strategy call last night with the lead members.

If we do get continued sell of we still want to continue to add some of these short premium strategies. If you are new to option alpha, and again if you are trading a ristifying account or a IRA account, again, just check the trade comments. We always will give you an alternative to the strangle or to the straddle.

Anything that we do undefying risk, we will give you the alternative so in this case, you could look at the iron condor, purchase the 53 calls or the 43 puts, or further out if you need to go further out to take in more credit. Always check that trade comment just in case.

Again, with this XLU strangle, we went ahead and entered each leg at about a 20 delta. We did the 51 calls, and we did the 45 puts. We scooted just a little bit towards the topside so we made it a little bit bullish in skew, which I think will end up helping just a little bit because I think maybe if the markets rally this utility ETF might come back a little bit more as well.

Most of the position was entered initially at about a 20 delta on each side. Then you can see the market kind of rallied away just a little bit towards the end of the month. Looking at just XLU as a complete whole picture right now. We've actually got a little bit of bullish skew because of our calendar spread that we have setting around 50.

The move today was actually really good for our calendar spread. I'd love to see XLU maybe move up tomorrow and then just kind of fade a little bit lower into our strangle zone as it gets further into October. We'll try to get out of that XLU position in our calendar spread tomorrow, or the next day.

Any move higher is really good for this position ... Let me just actually kind of toggle off this calendar ... I'm sorry, toggle off the strangle ... Because I think actually when you look at the actual calendar spread in of itself, you can see this is the calendar spread that we have for XLU. You can see any move higher that we have up around 50 is really good.

So the move up today welcomed. Turned this thing from the kind of like marginal break even trades to a profitable trade. I'd love to see this thing move up just a little bit more, and then from there can kind of fade and dance around this whole 50 zone. We've got the 51 calls that were short in October, so really that's our kind of top end range here.

Both of these trades I think are good. Again, you can make these in any account. You can do the ristified alternative here that you'll find in the trade comments if you are trading in IRA or an account that you can't do margin in.

As always, if you guys have questions on these, please add them to the comments section right below. Until next time, happy trading.

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