Thursday, February 28, 2013

Completed April Option Inventory Build-up

Yesterday, I completed the April option inventory by purchasing the RUT double calendar. I initiated the April positions in the last few days, adding an iron condor position every other day. Since my market outlook is bearish at the moment, I used the DC to finish the April portfolio and reduced the portfolio Vega significantly to -76 as shown in the image below. I chose the April/June DC, because it offered flatter profit zone when compared with the April/May DC.
During the DC order execution phase, I started with $20.15 which was $0.05 above middle price. But my orders could not get filled for about 45 minutes by my broker who offers better commissions than TOS. I had to increase my bid price by $0.05 multiple times eventually, after waiting about 15 minutes for each bid. In the meantime, I could see occasional drop (lasted a couple of minutes) of the mid price in TOS to be $0.20 below my bid price. Overall, the ask price drifted higher at my ordering period. The price of RUT was creeping up and the Delta of the DC was -1.36. So the Vega (volatility) must be increasing quickly to raise the mid price of the DC. It seems to confirm that front month spreads are easier to be filled and multiple month time spreads (particularly several month away) are difficult to fill.

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