Are options spreads really worth it?

crgarcia · Oct 31, 2007

Compared to just buying Calls or Puts?

thegazelle · Oct 31, 2007

Butterflies on GOOG on expiration day work well for me. Must watch closely though. If you can forecast which strike its going to close at, $3 turns into $9 within the same day.

forex-forex · Oct 31, 2007

Quote from crgarcia:

Compared to just buying Calls or Puts?

I think so. A debt spread can lower your costs and still have a potential return of 200% or more.

spindr0 · Oct 31, 2007

Are options spreads really worth it? Compared to just buying Calls or Puts?

Is car insurance really worth it? Is health insurance really worth it? How about life insurance? It all depends on what your needs are.

As for a more specific answer, you utilize the strategies that fit your risk/reward profile and accomplish your goals.

Don87109 · Nov 1, 2007

Quote from crgarcia:

Compared to just buying Calls or Puts?

The characteristic of many spreads is that P/L doesn't change very much for small to medium underlying price moves.

I usually have to wait until close to expiration before seeing significant P/L amounts.

Obviously if the trade is going against you this slow P/L could be a good thing. Vice-versa if your trade has a favorable move.

So like most things it's a trade off and a question of what you are comfortable with.

Don

rickf · Nov 1, 2007

Quote from thegazelle:

Butterflies on GOOG on expiration day work well for me. Must watch closely though. If you can forecast which strike its going to close at, $3 turns into $9 within the same day.

Geebus....knowing how GOOG moves, that sounds like a hell of a risk -- though the potential reward might be worth it. How tight are your wings on those spreads, and is this something you do Fri morning, or at the 1559 moment before close?

Reminds me of a chat I had with someone @ my gym a few weeks ago who was doing spreads going into Fri close to nickle-n-dime profits. I thought he was crazy, but if it works for him, c'est la vie, right?

Cache Landing · Nov 1, 2007

Quote from crgarcia:

Compared to just buying Calls or Puts?

Yes and No.

IMO, PnL has almost nothing to do with the decision. It is more about your timeline and what you are trying to forecast.

If you're trying to make money from vols regardless of direction then spreads make sense. If you're trying to make money from time decay, spreads allow the position to be less margin intensive and consequently the ROI rises.

Directionally I prefer single leg calls/puts if conditions and timeline are right though.

Gustaf · Nov 1, 2007

Ive made money on verticals and iron condors.

Going for plain puts/calls is too risky in my opinion.

thegazelle · Nov 1, 2007

I dip in slightly the night before, and try to enter full on the next morning. The wings are $10 away, just a normal butterfly. For $3 per, I think its a great risk/reward. I got creamed last expiration though when the whole market tanked. GOOG was sitting around $650 for most of the day, but then the market started to tank right at the close. Was able to get out for break even. Was painful watching it slip away, but I couldn't close out quick enough.

Quote from rickf:

Geebus....knowing how GOOG moves, that sounds like a hell of a risk -- though the potential reward might be worth it. How tight are your wings on those spreads, and is this something you do Fri morning, or at the 1559 moment before close?

Reminds me of a chat I had with someone @ my gym a few weeks ago who was doing spreads going into Fri close to nickle-n-dime profits. I thought he was crazy, but if it works for him, c'est la vie, right?

leaveit123 · Nov 1, 2007

Hello, guys!

I am a new comer and wanna try Forex Options

Any good MM/ECN firms and platforms to trade FX Options?

Thanks a lot if you can guide me through it!!!