AMZN Credit Spread

[Kim Klaiman]

Speak for yourself lol. I'm just messing with you, got to have a sense of humour <-- is that the canadian spelling lol . BTW the greeks are merely a label for a mathematical representation, and with experience you'll realize they don't work all the time, just like technical and fundamental analysis. But you're a vendor, ya gotta sell something...

In my 15 years in the financial markets, I learned few things. But I definitely don't pretend to know everything. I'm still learning something new every day, and I will continue doing so.

No, Greeks don't tell the whole story. But they can guide you in the right direction. You just used them by yourself by mentioning the <6% probability. How did you reach the 6%? By looking at the delta.

Look at it this way: yes, it is only 6% probability. But it means that in 6% of the trades, it will (or might) happen. If you collected $2 credit on a $10 spread, and it is worth now 0.30, why not to close it? You originally risked $800 to make $200, but now you risk $970 to make an extra $30. Is it worth it? Not to me.

Yes, price action might support that the spread will expire worthless, but many things are beyond our control. There are geopolitical risks - what if tomorrow Trump bombs North Korea and the markets crash 20%?

Closing early have another advantage: you release the margin and can use it for the next trade. And the next trade has (hopefully) a better potential then the extra 2-3% gain that you are holding for.

 

[grendel54]

Thanks for this info. People usually advise to close options positions at 50%. Just that this magic percentage is a mystery to me. The underlying can go in your favor weeks before expiration and you can close out at 50%. Or it can hang out near the strike days or even hours before expiration with 50%.

Ive had spreads be worthless then expire ITM 2 or 3 days later...

just sayin

 

[viruscore1]

In my 15 years in the financial markets, I learned few things. But I definitely don't pretend to know everything. I'm still learning something new every day, and I will continue doing so.

No, Greeks don't tell the whole story. But they can guide you in the right direction. You just used them by yourself by mentioning the <6% probability. How did you reach the 6%? By looking at the delta.

Look at it this way: yes, it is only 6% probability. But it means that in 6% of the trades, it will (or might) happen. If you collected $2 credit on a $10 spread, and it is worth now 0.30, why not to close it? You originally risked $800 to make $200, but now you risk $970 to make an extra $30. Is it worth it? Not to me.

Yes, price action might support that the spread will expire worthless, but many things are beyond our control. There are geopolitical risks - what if tomorrow Trump bombs North Korea and the markets crash 20%?

Closing early have another advantage: you release the margin and can use it for the next trade. And the next trade has (hopefully) a better potential then the extra 2-3% gain that you are holding for.

You can do whatever you want. But have you ever consider learning from profitable traders, rather regurgitating theory. I've been trading 15 years before the internet when everything was done on spreadsheets and entered into compuserve apps running 300 baud lol. Associates had dedicated handheld for options, and we thought it was the coolest gadget. Sure is funny now.
I learnt derivatives from quants on a clearinghouse IT assignment in Chicago. My team programmed option chains and spreads on futures, while you were studying for the Canadian securities course.
If you look closely at the original post, you'll realize the close is already in place. FYI The greeks exist for vendors and authors so they have something to sell. You know the cliche. If you can't dazzle with brilliance, you can baffle with BS. Joking aside, you know the greeks are a math equation, some just do the equation intuitively. I guess your teaching because you can't win trades, like the rest of them. Since you don't like my trade, why don't you take the other side and show us how you like it greek style

 

[grendel54]

FYI My software says <6% chance. My knowledge of AMZN and price action history agrees.
View attachment 177560

what software is this?

 

[viruscore1]

Profits speak for themselves.. till they don't.

If you want to continue trading options and ignore the greeks by calling it bs, by all means, do it. Good luck to you.

All the theory in the world without a trade is nothing but hot air. Place a trade moving forward using your greek style, lets see what ya got. Show us your setup, entry and trade maintenance using greek theory vs trolling others, show us how you're an authority and greeks can do better.

 

[TrustyJules]

"The greeks exist for vendors and authors so they have something to sell."

Err ... no. They are simply mathematical derivations that can be calculated with any commercially available spreadsheet. They are no more useful or useless than the speedometer in your car.

 

[viruscore1]

Ive had spreads be worthless then expire ITM 2 or 3 days later...
just sayin

What was the stock? You know my short leg strike price is otm about 20% on amzn. So you're saying amzn will drop 20% a few weeks/days before expiry and xmas shopping season.
Take a look at the opening thread. You'll see the close is live, which was placed after the fill. The position will be analyzed on a daily basis and adjusted accordingly, the outcome maybe to let it expire worthless but i won't know until theta decay. A greek reference to satisfy the greek know-it-alls. AKA "time decay".
You all got to come up with something new. My intention for this thread is to simplify a fairly complex trade without all the theoretical bs.

 

[viruscore1]

"The greeks exist for vendors and authors so they have something to sell."

Err ... no. They are simply mathematical derivations that can be calculated with any commercially available spreadsheet. They are no more useful or useless than the speedometer in your car.

Ok you said it. Some like it old school and don't use the greek labels but simply do the math instinctively. I was being facetious but many instructors, trade authors write and teach about complex theories without successfully putting them into practice. Maybe they had a few successful trades and ignored the bad ones.
I've been doing this along time, thru practice, trial and error, the theories don't work all the time. I had a quant team explain all their entry and exist setup's. I programmed them with signals to buy and sell. They worked beautifully until they didn't. Then I reversed the signals, and what was a buy, I changed the program to sell and vice versa, sell signals become a buy. Guess what, same results and sometimes even better. The quants stopped talking to me...

 

[Kim Klaiman]

You know the cliche. If you can't dazzle with brilliance, you can baffle with BS. Joking aside, you know the greeks are a math equation, some just do the equation intuitively. I guess your teaching because you can't win trades, like the rest of them.

You are barking on the wrong tree.

You might consider looking on our 6 years performance and/or My 2015 Personal Account Return: 80.2%

But I guess when you have no other arguments, you switch to personal attacks. Typical.

 

[viruscore1]

You are barking on the wrong tree.

You might consider looking on our 6 years performance and/or My 2015 Personal Account Return: 80.2%

But I guess when you have no other arguments, you switch to personal attacks. Typical.

Trading little boy accounts under 6 figures don't count. lol