Search results

Sigh. By choosing to trade a less competitive product like SPX, you receive less compensation for the risk you take. Indeed, after that bought-back-a -deep OTM-spread-at-25-cents-and-at-the-same -time-write-a-less-OTM-spread-at-15- cents-fiasco, I thought the lesson would be obvious...

You cannot rely on past experience when trying to estimate risk in the future. How do you KNOW that 5 adjustments or more might be needed in the near future?

It is absurd to choose to receive less compensation for taking on the same risk. But that's exactly what you're doing by trading a less liquid, less competitive product. And it is not the first time.

No, IB does not. This is one of the major shortcomings of IB, imo.

No, I did not say that you had 100% of your total capital in credit spread. But I HAVE seen your spreadsheets. The way you calculate your returns is you multiply the number of positions X the width of the handles. 100 positions for a 1175/1185 spread, according to your spreadsheet, is...

Past profits have little to do with future returns--you should know that. Your 5% returns are based on the width of the strikes. One major loss, and you could easily be out 75% of that base. If that major loss happens to be the first one out of the gate for some greenhorn, then those 5%...

I was referring to the paying 25 cents to buy back a deep, deep otm spread and then getting 15 cents back to sell a spread that was less otm. You lost ten cents a spread (before commissions) and now have a more risky (but still low risk) spread. I think this is obvious.

If one is selling X number of atm straddles and selling X number of credit spreads, then, yes, the risk is much less with credit spreads. The problem is with credit spreads is that some get way carried away and end up with way too many. Selling one straddle, in that way, would entail much less...

If it were impossible for the market to trade at 1180, the market maker never would have bid on the options you sold. Unlikely, yes. Very unlikely, yes. But no one knows the future. Just because you cannot see, does not meant that it will not happen.

If the SPX somehow gaps to 1180, the earlier, now closed, spread is still a (small) winner, but the new spread is a huge loser. It is unlikely, but no one knows the future--it certainly can happen in a short period of time. Gap risk is certainly the biggest danger to (bear call/bull put...

Wonder if the CBOE will have two sets of options trading during expiration week: the monthly options that have one week left, and these new weekly options (the way that LEAPS change their symbols as they are closer--months away--from expiration).

Of course it's ridiculous, but I guess they're afraid of having clients "naked" options. Needless to say, I do not recommend Scottrade if you trade options. :-)

That you locked in a profit is nice, but it is really not germane. What counts above all here is risk and the reward for taking on that risk. You traded in a very low risk position for one with higher (but still low) risk, and you are being compensated less to do so. That does not make sense...

The positions are certainly different. The one that was bought back for 25 cents is less likely to be itm than the one sold for 15 cents (not even counting commissions, which even with a deep, deep discount broker would not be insignificant). This does not sound like prudent risk management to...

That excerpt was from O'Connell, THE BUSINESS OF OPTIONS. The rest of the book is OK.

Nah--he's just from Philly.

I wouldn't sell teenies, but the point in BUYING such cheap options, at least for those who sell options, is to close out a profitable position. In that way, I would be paying six bucks ((.05*100)+ 1) for that transaction Well worth it, imo, when closing a trade.

If JJC is fortunate to have the stock rally or "spike" (whatever that means) right after he buys the calls, he could lock in a small profit, if he sells enough stock. Selling the stock in bits and pieces would not be enough to guarantee a profit. The only possibility of a big gain comes if...

Note how he really does not define his terms precisely--he is probably being intentionally vague so he can't be pinned down. "Spike" can mean whatever he wants it to mean. The whole statement is a glittering generality--essentially meaningless.

The funny thing, is that Scottrade allows covered calls, but selling cash-secured puts--no way. Is that silly or what? Needless to say, I stopped trading with them years ago.