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One other difference is that spreads show greater profits with smaller moves than a ordinary call. If you look at the P&L diagrams, you'll see that you'll make more money with the spread up until a certain point, the "point of indifference," where you would do equally well with either the BCS...

Whoa...this little comment goes very deep. I feel my worldview shifting... If I promise to make offerings on my alter asking the Heavens to grant you long life and great wealth, would you kindly explain this further? :-) Thank you

Gamma scalping is an entirely different strategy than a simple directional bet. It requires active and frequent adjustments (how often and how much is part of the art). It's not normally a strategy adopted by retail traders because the commissions can get pretty high. Tsk may be a pro or...

Ok, so it's dynamic - you keep adjusting to get your delta back to zero. I should have realized that. So is this a short IV trade or are you gamma scalping?

I wonder how delta hedging works with straddles since a delta hedge removes directional risk, but with a short straddle, you lose if the underlying breaks out to EITHER side. So do you go long or short the underlying?

I never thought of Thinkorswim/TDAmeritrade as a bucket shop, but I was clearly mistaken when it comes to FX....

I don't trade forex much but recently put on a few trades and I noticed that the amount of positive carry that I was making on positive interest rate pairs seemed far less than the amount of negative interest I was losing when I had on negative interest rate pairs. After some digging, I...

Yes, you can put more contracts on, but you won't make anything until the underlying trades right up to the b/e point. With plan old deep OTM calls/puts, convexity can make them rise in value well before the underlying trades through the b/e point. More so if it's puts since you'll be almost...

I don't know, one of the main advantages of deep OTM options is that they benefit greatly from Gamma and Vega increases even if it does not trade beyond the break-even at expiration. By using verticals, you hedge off most of the "convexity" and greatly limit your potential payoff. If you want...

It's interesting, the OP has received a lot of advice in this thread, but it seem nobody has commented on his terrible risk management, which assures that he will fail no matter what strategy he adopts. OP, do you realize you blew out trading a very conservative strategy? Seriously...

So let me see if I understand this. You took a GLD position of 1,200 shares (worth, at the close, $205,000 or so), and you didn't know what might happen? Either you have very deep pockets and this is chump change for you, or you're exceptionally reckless. I truly hope the former, not the...

People keep saying this, but selling a credit spread is synthetically the same as buying a debit spread, at the same strike prices. There may be slight differences in the P/L at expiration depending on the skew, but either way, the upside and downside are both capped. The only way to blow...

Buying options eliminates black swan "tail risk." For example, if you hold ES overnight for swing trades, imagine you're long and you wake up to discover Greece gave up and defaulted. Or imagine you wake up and discover Iran launched missals into Israel. What do you think would happen to your...

Frank, Thanks for you caution. I am still trying to think about risk/reward in the options context, so all advice is greatly appreciated. Yes, the thing I worry about is a true sudden black swan, the kind of thing that happens overnight and there is no way out my position until market open...

Ok, I think I get it. My current trading strategy is similiar to the Turtles strategy - I try to ride big trends (though my entry signals are different). This means I win small, lose small, or breakeven on 95% of my trades, and then 5% are huge winners that pay for the losers and then some...

Thanks for the reply. I get the analogy, but black swans are black swans, if things are bad enough to take out 1200/1980, they take out ATM put spreads way sooner. At least with far OTM, there is time to bail out before you have to take the full loss. I usually swing trade stocks and...

That's out of the money. In fact, it's based on what I typed into Thinkorswim a couple of hours ago, so it's 30 or so SPX points OTM. Yes, closer to the money and the R:R is higher (though risk still exceeds reward), but then the odds of a winning trade are lower. I would think to make...

Hey guys, I am new to options and I'm finding myself mystified by something. I keep reading how a great way to make income in a bull market is by selling puts. I get that selling naked puts is somewhat risky (though not obvious that it's any more risky than just owning shares outright), so...

Hey guys, I am new to options and I'm finding myself mystified by something. I keep reading how a great way to make income in a bull market is by selling puts. I get that selling naked puts is somewhat risky (though not obvious that it's any more risky than just owning shares outright), so...

Funny, I have not checked this forum in a while and last time I was here everyone thought option_trader was a lunatic. Turns out he was right - and a lot of us (me included) missed out on an incredible rally because we were stuck in bear mode. Those who think we are going to retest the March...