tastylive: The Skinny On Options Data Science

In today's From Theory to Practice, Jim Schultz closed an underperforming GLD spread at its max value of $5, demonstrating proper expiration management. He then established new positions by selling a 20-delta strangle in MES futures options expiring November 28th and adding an MNQ position despite challenging bid-ask spreads.

Hosts Nick and Tony conducted an intense Fast Market session during extreme volatility, with Nick celebrating closing profitable butterfly positions in HIMS ($1 profit) and an AMD call ratio spread that had been "fully in the money" before stocks surged 50%. The session featured seven successful trades including an AMD 180-280 skewed strangle at $8.55 capturing bearish sentiment post-rally, OSCAR 17 puts at $1.36, PAAS December 40/November 45 call diagonal at $2.44 (with Nick getting aggressive 50 cents off mid-market), NVIDIA 160-210 iron condor with 20-point wings at $4.31, Oracle 240-350 strangle at mid-price after Nick strategically legged out of prior iron condor put spread yesterday, and UNH November 320 puts at $5.81. The precious metals crash provided major relief with gold down $60 and silver down $2.60 (5%), helping their short positions including Nick's 3,800-3,850-3,900 butterfly that was 300 points in the money. The session emphasized nimbleness with markets swinging wildly - at one point E-minis moved from -26 to +8 while Nick stressed going "at good prices" since market makers are "taking whatever they can get" during volatile days.

TSM reported strong earnings with optimistic AI outlook, though stock price movement remained underwhelming. This exemplifies the current pattern with chip stocks - stellar results but muted price reactions. TSM's positive guidance boosted related companies like NVIDIA, AVGO, AMD and Apple. CoreWeave announced a first-of-its-kind AI object storage service, positioning itself as a potential dark horse in the AI space. Regional banks Zions and Western Alliance warned of credit loan losses, signaling potential consumer struggles. This concerning trend, coupled with employment market issues, contributed to falling two-year yields as markets anticipate additional rate cuts. Gold and silver continue their meteoric rise, with gold approaching an unprecedented tenth consecutive weekly gain. Market participants are currently favoring precious metals over other investments including Bitcoin, cash, and bonds.

In today's From Theory to Practice, Dr. Jim discusses how much leverage to use in a long delta portfolio, emphasizing a different approach from short delta strategies. Unlike short delta positions where the delta-theta ratio provides protection, long delta positions lack this shield during volatility expansion. For long delta traders, he recommends using SPY as a reference point to measure leverage. A portfolio with beta-weighted delta equal to its notional value in SPY shares (1X leverage) means you're essentially holding the equivalent of being fully invested in SPY. Most traders settle between 1X-3X leverage, with experienced traders occasionally going as high as 5X-6X.

FxGlenn joined the Liz and Jenny Show to discuss their successful forex trade in USD/CHF, which netted a small profit. The hosts decided to close the position early rather than setting a stop-loss after learning about negative swap costs. The duo initiated a new long position in USD/CHF at 0.8 to capitalize on overnight carry gains, as U.S. interest rates exceed those in Switzerland. FxGlenn provided standard deviation metrics to help the hosts set realistic profit targets. Despite Bitcoin falling to $109K, the hosts maintained bullish sentiment while managing positions in crypto ETFs. The VIX climbed to 21.65 amid mixed market signals, prompting discussion about taking smaller profits in the current environment. Jenny and Liz also managed a zebra position in ETHOP, sold covered calls on LUNAR, and noted that the silver/gold ratio had returned to balance with silver outperforming gold.

In today's From Theory to Practice, Dr. Jim examines how much leverage traders should use in derivatives trading, emphasizing the importance of the delta-theta ratio for short delta portfolios. He recommends targeting a 0.5 ratio (one short delta for every two positive theta), with portfolio theta levels between 0.1% to 0.5% of net liquidation value based on experience level, account size and market volatility. The session highlights how VIX levels should influence position sizing, with higher volatility periods warranting more aggressive theta deployment.