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Two comments: It sounds like you have already discovered the two central drawbacks to this strategy! #1. These plays are best when IV is below the historical average on the long straddle options, preferably close to historical lows. Then you have a chance to benefit from reversion to the...

JW, First , a comment on commissions-- these days you should be spending less than $1.00 per option contract and with decent volume you can probably go down to $0.70 or $0.75, or possibly have a blended rate that involves a fixed fee and a low per option rate beyond a certain point. My...

Just comparing historical to implied is not sufficient, although it does help somewhat with decision making. That is, if the implied is high, you need to ask why, but if you are working with an index, you may have a modest edge if the implied is very high since it does tend to revert to the...

Having seen many of dmo's posts, I'd have to say that he's been generally right. There is no statistical edge to any particular strategy all the time, no magic bullet position guaranteed to be profitable under every circumstance. Many of us prefer certain strategies and have a different level...

A comment on resilience to loss vs. profit-- they are not opposites. An IC position can have a high probability of profit, and if it does, it will also have a low probability of loss, which is directly related to that same probability (but these do not quite add up to 100% due to slippage and...

Pismo, I have thought about the emini solution, and am playing with Ninja Trader on simulation to learn how to do futures effectively as a hedging tool. My current thinking is the most effective time to use the ES would be in a situation where you were holding overnight on expiry night hoping...

Money management, and hence the adjustments, is more important than the original strategy, although the initial strategy selection narrows the scope and sets the framework for the adjustment stages. If you are holding for two months, you will probably have to make many more trades as...

This is not a comment on technical analysis in particular, but I note that in the overall period 07 until May 09, EVERYONE of the technical indicators individually outperformed the S&P 500!

JW: I'm currently using SPX for my IC's, despite their wide bid-ask spreads. I use them mainly because they offer many strikes spaced at $5 intervals, which makes adjustment pretty straightforward. Other indexes can be used such as the RUT and the NDX, but then you need to make broader...

I agree with Phil (optioncoach) and Mark on this one. Here's my take on your position. It looks like that you are writing options for about a dollar of premium for about one month away, so I assume you write a round just after the expiration day and are looking for a four week holding. If...

xflat, Of course, I realize that the market maker is doing the trading with me (or you) a large percentage of the time, but in really liquid options that trade large volumes, the market maker knows that it is a matter of minutes or possibly even seconds before he can unload the options at a...

Smith the Trader-- how close are you putting your IC's to the current prices of the index you are working with? It seems to me that you may be cutting things too close, and then running into trouble as a result. I know that the last couple of weeks haven't been that explosively upward. They...

Clarodina, the basic fact is that this is a May 09 option which means that it expires two weeks from now. The chances of IBM being at 60 in two weeks time is really small ie ~0. That's why they have essentially no value. Nitro is obviously being sarcastic in his response because he'd be...

Thank you Mark and jwcapital for your commentary. Mark-- I probably should have mentioned that these were SPX options, so the VIX relationship is pretty directly related to the IV for these options. I find that the skew smile actually shifts noticeably over time, which reflects the market...

Mark, a question for you--what amount of your gross premium do you set aside to use in debit "insurance" spreads? Obviously, a person wants to be collecting theta, so I assume you don't use all of it, but you do use them, so I'm curious about how you work this strategy. In my case, I'm...

Margin is commonly thought of as a percentage of the underlying product, but that is not exactly the case. The ES mini contract margin currently is $5625 (per contract), which is a reduction from recent highs of about $6200. The CME group sets the margin rates as they see fit to reflect the...

kxvid's comment is exactly the problem. Most people think futures are INCREDIBLY RISKY. The reality is that they are almost the same thing as the ETF, with piles more leverage if you want to use it (if you use no leverage, they are correlated about 97%+). They're really more flexible than...

I think that MTE is revealing one of the secrets of success with IC's, and I totally agree with his approach. "Don't overleverage!" If you have no margin room left when you set up your IC, you give yourself very little room to adjust. With a moving market like we have had in the last six...

FIrst comment: Don't worry about sucking at negotiating! Just send them an email with a rate you would find favorable and see what happens. Probably they will give you a counter offer, and you will be fine. It helps to have a track record of a certain trading volume. I did this with no...

The short answer in that scenario is yes you are until the longs expire anyway. There are a couple of variables to consider beyond the simple answer that depend on the strike prices and the current value of the stock, but generally you will be protected in the short term in the situation you...