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The short legs of the initial DDs were too far from the spot. It didn't give me a good return on the margin as compared to verticals.

Since I didn't close my 820 call when I covered my 810 short so it didn't change my margin requirement. I opened this account with around 30K. The current margin requirement is still 30K. [edit] I also have my dec 840 call from the long leg of the diagonal. The short is partially hedged...

Domestic, I just did a quick check. These were my rut ICs for nov. rut 810/820 call @ a credit of 0.6, covered at 0.15 rut 720/710 put @ a credit of 0.95, covered at 0.15. A net profit of 1.25 on a margin of 10. So my return on margin is 12.5%. It seems that we can achieve...

btc nov 720/710 Put @ 0.15 debit. sto dec 720/710 Put @ 1.1 credit I have all my nov ICs covered, with nov diagaonal remaining.

Jeff and you are right. I will open an IB account soon to compare span margin with other leveraging method. BTW I just opened a TOS account for ICs and DDs because they charge only 1-leg margin. Sometimes having too many accounts will confuse myself when adjustment is required.

Did you mean "yes and no" to my second statement? Or "yes" to my "agree" statement, and "no" to my strategy statement. Just want to clarify and not to confuse the soccer dads and moms. :D

I also over simplified my strategy. :D

When you have to fight for the b/a spread, you create a negative expectancy, and you lose an "edge".

Jeff, I understand that. My trading strategy depends on the forecast of future risk. IB calculates SPAN for me but doesn't tell you what-if scenario.

If fat tail events happened more often than theoretical, it means the probability of other sections in the prob curve will be lower. Isn't it make sense to buy a "positve" edge lottery with FOTM options? BTW, where is Taleb now? He can't survive long neither. Slow bleeding for a long time...

Agreed! In fact dynamic hedging can be implemented and replaced by static hedging or exotic. Spread is one kind of static hedging. Can you change the expectancy by using a complex combo? Not in my book.

Mav, The best strategy is to short ATM and to long a lot of FOTM options. Right?

Eric, The best guess for "future" volatility is to use the current volatility assuming a random event. For verticals, You don't see positive expectancy that often when you consider slippage (the b/a spread). Expectancy is determined by the IV of the short, IV of the long, and...

The expectancy is determined by the actual "future" volatility. On average, IV is higher than HV. Without knowing the future, and assuming a pure random event, the best guess for "future" volatility is to use current volatility. With higher IV at lower strikes for spx, the naked put writing...

I didn't mean spreads. I meant naked put writing.

[edit] I have no intent of promoting option selling.

The expectancy is not zero, but it is close to it. There is a slightly positive expectancy for a seller of put options because of the skew.

Thanks. I understand the power of compounding. If we can make 6% a month, it means an annual return of 100%. With 50K, you will have over 1 mil in less than 5 years. I still haven't started trading future options because I don't understand span margin. I don't have the formula for it. I...

Thats a very good return. I am using spread not for protection, but for leveraging. How much span margin do you normally use when compared to your capital?