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Credit spread - deep otm - false sense of security?
I think you may be misinterpretting or misunderstanding how I am trading and when I trade. Yes, the way I trade, is avoiding the front month, meaning I will open back ratio trades with around 2 months out or even more sometimes. I thought I was clear in saying my puts for SEPT 680/660 are... -
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Credit spread - deep otm - false sense of security?
I would just try to put a similar trade on TOS or send me a PM with your email and I can send you an example of a trade with how I like to set up. The risk profile is everything, then stress test with time, price and volatility. Somebody gave a good explanation of why 10 points on calls rather... -
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Credit spread - deep otm - false sense of security?
I'm adding additional longs after getting the easy fill. Otherwise, I would not get the risk profile I want, so to clarify, I put them on without hesitation, the credit is good enough. I usually use 20 points but I'm also starting to use just a 10 point spread for calls. -
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Credit spread - deep otm - false sense of security?
You got it! Way toooo dangerous to trade within a month, for me anyways but some traders like that kind of excitement and thats why trading is different for everybody. I'm using TOS only. I start about a couple months out, open trades 1/2 or 1/3 at a time, then add to the trade and keep the... -
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Credit spread - deep otm - false sense of security?
I would not make a trade like this, very close to expiration and at/in the money, the spread is too wide. You could be assigned and you would then be long 600 shares of SPY. Thats just my opinion. -
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Credit spread - deep otm - false sense of security?
I opened that trade on 08/01 but look at the market since. I still have call back ratios at 860/880 and looking to start chopping that side down when the time is right. Its a lot safer to open trades like this several weeks prior to expiration. When you have the market move one... -
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Credit spread - deep otm - false sense of security?
Yes, there's more than one way to reduce risk. I have already closed out most of my puts, SEPT RUT 680/660 back ratios and we are 29 days 'til expiry. -
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Credit spread - deep otm - false sense of security?
Adjustments or additional trades is a topic in and of itself. I like to start with a 1/2 or 1/3 postion then just add to the trade so the adjustments are already baked in. If you were adjusting the call side, its likely you would have a put side profit, so you could buy back the short... -
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Newbie question: stock up, option down, why?
Did you check the volatility skew curve before you put the trade on? -
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Taking advantage of this low vol?
Try setting up and testing a time ratio spread, maybe. -
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Credit spread - deep otm - false sense of security?
I agree, when you stress test a similar trade by adding vol, even 10 points, you can see clearly that backratios are winners. So, if you wake up one day and you have a financial disaster and futures down heavy, you don't have to panic. Over time the trade changes obviously, so you will have to... -
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Credit spread - deep otm - false sense of security?
I use thinkorswim. Very good discussion, I enjoyed it. -
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Credit spread - deep otm - false sense of security?
Sure, its possible for a covered stock trade to have single digit returns. There are other trades that could enhance returns. The risk you discussed is selling puts on stocks you like. Then covered calls if assigned. Correct? I'd go with covered stock/married puts. If you are sitting... -
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Credit spread - deep otm - false sense of security?
Downside, well, you could hold onto short positions 'til the bitter end and risk a max loss, this would be very irresponsible right? After all, this trade does ultimately have the the same max loss as an iron condor. If the market is coming after your shorts, well, you have to adjust, which... -
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Credit spread - deep otm - false sense of security?
Yes, I would go along with selling an in the money call if assigned as you mention, or better, just sell the stock and move on. Its just when you see a bear market, and have a large exposure, you're going to get torched trading this way. They come along quickly and all stocks suddenly get... -
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Credit spread - deep otm - false sense of security?
The market can continue to rip higher, so you have protection on the upside as well. -
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Credit spread - deep otm - false sense of security?
Hi, on what I think about covered calls, its how I started, so I know this strategy will pull new traders in to buying stocks just to sell calls against them. So, I was a sucker too. ha. When you have a stock put to you, this is probably not a good sign for the stock. If you sell calls... -
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Credit spread - deep otm - false sense of security?
Yes, the goal is to maintain a positive vomma. I stress test the trade by adding/subtracting vol, price and add time. The trade will usually start off with a slightly neg theta but this is not a concern. Neutralizing vega is the key. My first adjustment, if you want to call it that, is... -
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Credit spread - deep otm - false sense of security?
If you look on page 3 of this thread, there's an example there. I'm in this trade and looking to add to it soon. -
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I closed out all my short put positions.
Since shorts are obligations, I think its not a bad idea to close them out if you are either happy/successful with the results. Nothing to do with being biased in any way, just a safer way to trade. Its not worth the risk of hanging on for every penny. Just one man's opinion.