Good Afternoon,
Wanted to share this trade with yo guys that I did last week, it actually lasted from Thursday AM to the Friday close, it combined weekly options and daily options, it had 2 strangles in it and one really wide IBF of 100 pips wide see pic below and explanation below that, please give your feedback on how to improve this or if you have any questions send them my way.
Ok, so I started to create this trade on Thursday morning about 1/2 hour before the EUR/USD news came out or 9:09 to be exact:), the first thing I did was set up my strangle with hourly options (5 pip wide strikes;)) got them dirt cheap the upper was $7 and the bottom was $4 so I went ahead and did 2 contracts on each side so $14 cost upper and $8 cost lower. I did not enter any parts of the IBF yet as I usually do, I actually waited until 9:25 and since it was Thursday I was able to use a weekly option strike so I bought the 1.3225 for $80 (Looking for $20 profit on this leg) I did not go ahead and put the upper level on my IBF until 11:51am Thursday and again I used a weekly option, I sold the 1.3325 for $20 so looking for $20 profit on this side as well, the best part here is I got this IBF set up with a 100 pip wide spread, that’s awesome!!
Oh on the this upper level of the IBF I actually had a working order to strike at this price so I was not sitting there waiting for it to trigger.
Now before I explain the rest of the trade lets see how the first strangle played out: Well it was not a strong spike but it did move enough for me to take some profit, the news came out at 10:00 and I had a 10:30 exp on my strangle, so what I did when I seen it was a bit of a lethargic news move I sold the upper strangle at 10:13 for $25 so that was a profit of $18 remember I bought this for $8, so $18 profit x 2 contracts is $36 - the $8 loss on the other side of the strangle so on this strangle we made $28 on a busted news release - not bad!:o
Ok, so now that the first strangle is out of the way, all I have now is a super wide IBF set to expire on Friday at 3pm, however I realized there is another news event being released at 10am on Friday on the EUR/USD, So I still feel ok about the IBF because its so **** wide but want to take a crack at profiting from Yellen speaking and the news being released at 10am, so what I did was set up another strangle about 30 min before the release of the news, however the pricing was not as great as the first strangle so only could do 1 contract on each side, no big deal! now the nice thing about this strangle is that it was a free play because I already made the $28 earlier so its covered basically a risk free play! Well the news came out and again was a bit sluggish so I bought the lower strangle only 9 min after the news was released,now I sold the lower for $14 and bought it back at $45 so a $31 profit - the $16 up top and it was a $15 profit - Unfortunately I bought this back a little too soon as the lower leg of the strangle actually expired below my strike so I could have realized an $86 profit on this side and I should let it go since this was a free play, now that I’m writing this I see that lol
So far we gained $28 on the first strangle and $15 on the second strangle so $43 total on the strangles:cool:
Now all we have left is the totally awesome 100 pip wide IBF which would have expired in the range but I did close it at 2:28 because the was a news release at the odd time of 2:30 on a Friday afternoon, it really didn’t matter because the weekly options I had for the IBF were almost at the max profit levels anyway so it was fine I still profited close to the $20 a side I think I got like $16 a side so $32.
So this trade was a profit of $75, keep in mind this is setting this up with only 1 or 2 contracts you can really bank is you have the capital to do more contracts with good money management of course!!!
Hope this is not to confusing, of you got questions let me know.
Also keep in mind when you get later in the week like Thursday and you wan to set up IBF try combining the weekly options with other options you can often find some sweet spreads on these binaries for min $40 profit!! Oh and you want to also remember that whe doing these premium collection trades be sure to be looking for the pricing well in advance so you can find your pricing like in my trade above I had to start getting the IBF set up more than 24 hours out, you need IV to get the pricing, weather you get it because a pending news trade or just beacuse of a big chunk of time in between your strike and expiry, I find setting these things up around 4:00 in afternoon is pretty good, looking for exps the next day, you can often get 80 pip wide spreads and sometimes 100 the lowest I go is 60 and only for certain things like a USD/CAD 7am expiry placed sometime the prior afternoon.
Send me you feedback and questions.
