MyDVICE

- LETTER & VIEWS by NEV R. AGN

UPDATE on Option Structure initiated on 23 June 2020 – sell 1x 30 Oct Put & buy 1x 68 Feb Call (initiated for ZERO net premium; positive net theta = 0.23; positive net vega = 5.71)

31 July 2020

Summertime, Summertime! Digging it!

OIL POST NUMBER 9

– – –  Strategy Initiated on 23 June 2020 (using ICE Brent Options):

1. Sell 1x October 30 Put (expiry: 25 August 2020; futures price reference = 43.40; Delta = 9; Implied Volatility = 71.28%); and

2. Buy 1x February 68 Call (expiry: 23 December 2020; futures price reference = 44.00; Delta = 20; Implied Volatility = 44.51%).

– – –  Strategy Valuation as at closing 30 July 2020:

1. October 30 Put premium = 0.08 (futures price reference = 43.25; Delta = <1; Implied Volatility = 71.39%); and

2. February 68 Call premium = 0.24 (futures price reference = 44.59; Delta = 8.4; Implied Volatility = 37.48%),

Net premium = + 0.16; Net vega = + 4.35; Net time decay = – 0.54; Net delta = + 7.

Market is still centered around this structure’s entry point (circa 43) and therefore I continue to recommend holding the position.  In less than three weeks we would be left with a “free” December expiry call option struck at 68.  If this is the case then I will recommend a rollover after the 25 August expiry of the October 30 put.  Perhaps for a big push up before year end?  

Upcomming post:  (a) long-term positioning and goals, and (b) rolling over to a new calendar risk reversal position in ICE Brent Options – reasons for doing so with the above structure.

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