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I entered a debit strangle spread (atm bull call spread & atm bear put spread) on AAPL today, as earnings are tomorrow. To test the extreme effect of slippage, I entered at market. Bull call spread: Nov 100/105 (8.80/6.65); Bear put spread: Nov 95/90 (10.30/8.00). It's a matter of wait &...

Are you a full-time trader? Walt

In looking at AAPL, I don't see how slippage & commissions will prevent me from being profitable. It seems that at worse case, the slippage & commissions would eat into about 30% of my profit margin. Therefore, instead of clearing $1 per trade, I'd clear only $0.70 per trade. Is there another...

Hi John, I'm sorry for not being clear about my strategy. I'm talking about the opposite of an IC. That's why I was calling it a "debit" IC. In other words, two atm debit spreads is what I'm talking about. This would be a net cost to enter such a position. For example, with AAPL, it'll...

At the risk of sounding silly, why not enter into atm debit iron condor. I don't know the name of such a positoin; however, it takes advantage of two shortcomings of the IC. The Iron Condor is a negative risk:reward position, and many recommend entering an IC at least 3 strikes otm. What I am...

It's no worse than other multi-legged spreads. The problem with a six-legged transaction (enter & exit) is that it's more theoretical than realistic. How many six-legged positions, that are entered into and exited, are able to overcome slippage? It seems like an infeasible type trade because...

Excellent point... but how would you overcome the slippage associated with so many positions for each trade???

Thanks for the reply dmo; however, I don't understand how a butterfly or an iron condor can be profitable with a big move, unless you add additional positions on the wings. If you are indeed adding additional positions on the wings, then why not simply go naked long straddles without the...

I didn't know Taleb's main strategy was debit spreads, although the long wings were otc otm. Walt

My point exactly... why not simply go long with call or puts, depending on the outcome of the earnings report. Or as Nassim Taleb did, buy otm straddle options with several months til expiration and wait for the big move. Personally, I think heavily traded stocks, after dividends or earnings...

Advice from many "gurus" such as Maverick and others (i.e. DMO, RiskDoctor & Atticus [I think]) recommend going long on the wings with spreads as among the best of option strategies. In many instances, it appears that an Iron Condor with an extra position on the wings were described. The...

It seems that the market is uncertain. It doesn't know whether to form a contango or a backwardation. I guess this is the impact of such a deep involvement of government in the market place. Walt

Thanks Andy... Iguess seasonality has its merits; however, so many unique variables (i.e. the weather or some geo-political occurrence) can disrupt the expected seasonal spread relationships. I am currently using a mean reversion technique with Crude Oil. Although I am now profitable with...

Ironically, I recently posted in "Andy's Spread Journal" a related question to Andy (Joe Ross's Spread Trading ace). I asked him if he typically trades reversion to mean or trend with his futures calendar spreads. Please excuse my ignorance, but what's ARFIMA??? Walt

Is anyone experienced with Reverse Iron Condors where the long legs are ITM and the short legs are ATM? I tried such an entry today. My logic is based upon the fact that if an Iron condor is established atm, then it has a high probability of failure. Conversely, if such a set-up has a srong...

Andy, Are your spread orders based on mean reversion or trend? thanks, Walt

Were your flies Long, Iron, Short or Reverse Iron??? Walt

I agree that probabilities have been foiled. Afterall, that's the essence of Nassim Taleb's Black Swan epistemology. However, that's why I coupled risk management with probabilities. LTCM, Victor Niederhoffer & many other hedge funds that failed reportedly did so (at least in part) due to...

thanks for the suggestion Engine... however, the vertical put credit spread will be painful if IV increases or the market drops. And more often than not, when the market drops, IV rises. I must admit that the notion of 2 legs is much better. I ended up at the various strategies in th poll...

The reverse calendar is treated as a naked short by most brokers; therefore, that strategy has the worst margin requirement. The Reverse Irons are net debit strategies. The shorts are hedged, and thus require a fraction of an otherwise naked position. Most brokers have a margin requirement...