Quote from cactiman:
Trying to call Tops during an uptrend is a low percentage trade.
Simple Bull Put Spreads would have paid less than the ICs, but I'd have scored 100% instead of taking losses!
It's no secret how I feel about credit spreads vs naked puts.
Assuming one is reasonably good at picking bottoms, or stocks that are "recoverable", I prefer a naked put. Mostly because of the ability to buy the stock if you want. But again, it assumes you don't invest in crap. Particularly over valued crap.
While a credit spread can wipe you out quicker for an even smaller % drop than a naked put.
And even if you close with the stock between your strikes, a 50 - 80% loss really doesn't seem like all that great a deal either.
So I agree that IC are even more risky than credit spreads.
As the IC can wipe you out if the stock (index) goes excessively in either direction.
The added risk of an IC bi-directional wipe out, really doesn't seem to be worth the added benefit of two credits vs one.
Or am I missing something???
Other than the double credit, is the other IC attraction that some traders simply enjoy the challenge of monitoring and "managing" them via frequent adjustments.... if needed???
Or to put it another way, here in vegas, some players like to just play the pass/don't pass line at the crap table.
While other players find the pass line too boring, and really seem to enjoy the "action" of working all kinds of bets in the center of the table.
Are the more simple option trades just too boring for some traders, just as the pass line is too boring for some gamblers?
I don't mean to sound insulting, comparing traders to gamblers, if that is how I'm coming across.
I honestly just don't understand the attraction of IC's. The double credit doesn't seem to be worth the double risk and double stress.
Or am I missing something???
