Week 4 NLV (Monday close): $2331.52 (-168.48/-6.7%)

One of our busiest days so far with six trades, so let’s jump right in! Two of the six trades were to open — long put spreads in SPY and QQQ to take advantage of extremely low volatility and take a small directional gamble — while the remaining four were mostly delta adjustments of existing positions. Keeping in mind that when we put on volatility trades, we want to try and keep our exposure mainly to volatility instead of direction or other factors. As positions evolve, we want to keep an eye on our greeks and take action when those “other factors” (typically delta) begin to overshadow the one we intended to trade in the first place (vega).

The easiest decisions to make when adjusting greeks is the closing of “units,” which are options we have sold and are now worth close to zero. For example, in the AAPL double calendar we bought, the short leg of the put half of the spread was trading at open for 0.01 x 0.02. Is a short option trading for almost zero helping us take advantage of volatility? I’d argue no, in that the price of that option can go down only one penny to no bid x 0.01 and up as far as volatility allows. I closed that leg near the open for $0.02, leaving us long two legs and short one more 23Dec leg (109 call), which was deep ITM and an exercise risk. That leg was rolled one week out to the 30Dec 109 for a credit of $0.05. Including commissions, the entire adjustment was flat within a dollar, leaving us the following adjusted position:

• (-1 AAPL 30Dec16 109 call, +1 AAPL 06Jan17 109 straddle) @ 1.05

AAPL IV remains in its 2nd percentile, and I’ll be looking to manage this trade as soon as possible. Best case at this point would be a quick move down towards the short 109 call and/or an increase in IV. With 11 days to go on the short call and 18 on the long legs, time is running out.

AAPL Position Greeks (dbl cal + backspread) : -9.79Δ, 10.39γ, 20.62ν, -5.58θ