Calendar spreads

[Don Bright]

Quote from Maverick74:



Yeah Don but you never would have gotten the bid and offer on those prices. That spread would have cost you like a dollar at least. Now lets say you do that spread 100 times. That's 10k!!!!. Now even then you may say well 10k isn't that much. But how much money are you really making when that doesn't happen. That one trade will wipe out everything you made on the last 5 plays bringing you back to square one. So where is the upside in this strategy? And this is a safe example you gave. Earlier you were talking about selling gamma like a fool and I think your brother slapped some sense into you. LOL. But even with this moderately conservative play, I just don't see how you are going to be basking in the sun with that tiny theta you are going to collect on such a small spread like that one you mentioned. And all it takes is for a gap one way or the other and you give back all those tiny little profits you made.

No wonder you started a prop firm. If this really did work as well as you thought it would you would be sipping pina`coladas from the islands. Not easy huh Don?

I'm sorry, but we stick by the basic play...and you have helped convince me that no one should bother with trading options anymore....you correctly point out that you cannot buy on bid and sell on offer, so you admit that there is no edge....

But back to the basis of this thread, long calendar spreads can make sense, as I said days ago....the other way is not going to work.

You point out that I may lose back what I made in 5 plays....suggesting that I am right 5 of 6 times....as opposed to being wrong 5 of 6 times betting on the (very) unlikely outcome.

I traded with back spreaders, front spreaders, and all the rest.....I chose to go with the more likely outcomes rather than bet on the earthquake happening.

Trade any way you like, and I hope you do as well as we did (back when there was an edge....yes, it is harder to do now)....

Check in with me in April, let me know how your p&L for 2003 came out....

I need to go meet with my campaign manager, we're going to take on Arnold in the next election!!

Have a good one!!

Don

 

[Maverick74]

Quote from ChrisM:



Maverick,

he can code this in EL for TS. Is this OK ?

OK, I don't have TS but if he can do it that's great. Is there a way to write the code for Excel?

 

[ChrisM]

Quote from Maverick74:



OK, I don't have TS but if he can do it that's great. Is there a way to write the code for Excel?

Is this Visual Basic ? I think so. His concern however was how to place orders automatically. TS has such feature, can you do the same in Excel ?

 

[Maverick74]

Quote from Don Bright:



I'm sorry, but we stick by the basic play...and you have helped convince me that no one should bother with trading options anymore....you correctly point out that you cannot buy on bid and sell on offer, so you admit that there is no edge....

But back to the basis of this thread, long calendar spreads can make sense, as I said days ago....the other way is not going to work.

You point out that I may lose back what I made in 5 plays....suggesting that I am right 5 of 6 times....as opposed to being wrong 5 of 6 times betting on the (very) unlikely outcome.

I traded with back spreaders, front spreaders, and all the rest.....I chose to go with the more likely outcomes rather than bet on the earthquake happening.

Trade any way you like, and I hope you do as well as we did (back when there was an edge....yes, it is harder to do now)....

Check in with me in April, let me know how your p&L for 2003 came out....

I need to go meet with my campaign manager, we're going to take on Arnold in the next election!!

Have a good one!!

Don

Great, so now I got you and nomoreoptions away from trading options. LOL. Maybe I should be quiet, I'm hurting liquidity here. Don, I'm going to go out on a limb here, options were never your forte` were they? Admit, you followed your brother down to the floor and carried his handheld for him and occasionally picked up lunch for the guys in the pit. LOL.

Well kidding aside, exactly what is it about short calendars don't you like? With a short calendar I am long gamma but short vega, very expensive vega at that. If and when that volatility comes in, and it always comes in Don, I stand to clean up. If the stock runs, I stand to clean up and if the stock gaps I stand to clean up. As long as you know how to play the vega I find this has much more upside then you trying to pick up a nickel on the ground.

And I just don't get this earthquake analogy. I'm not Nassim Taleb here buying far dated out of the money calls and puts and waiting for the end of the world. I'm selling premium just like you are. Only I have 10 times the upside that you do. And if I'm worried about the stock collapsing on me and having the Vol run up on me, I can add some short stock . You have no way to really manage your risk accept to hope and prey a certain outcome never happens and you know they always do. In fact the outcome I gave you was not that extreme, it happens on a daily basis.

I still say if you really have a hard on for selling front month then just backspread it. Sell the 55 call in bby and buy two 60 calls. Or preferably sell the 60 call and buy 2 65's. You'll still earn your precious theta and also give yourself unlimited upside.

You haven't convinced anyone here Don.

On a side note, who do you think you are running against Arnold? What is all this? Explain.

 

[Maverick74]

Quote from ChrisM:



Is this Visual Basic ? I think so. His concern however was how to place orders automatically. TS has such feature, can you do the same in Excel ?

Yeah I think it is. I have no idea. I'm not an excel expert either. Somebody on here mentioned a program that you can execute orders through after you write the language. Neoticker maybe? Not sure. This is my weak area.

 

[ChrisM]

Quote from Maverick74:



Yeah I think it is. I have no idea. I'm not an excel expert either. Somebody on here mentioned a program that you can execute orders through after you write the language. Neoticker maybe? Not sure. This is my weak area.

I am not very much passionate about computers either. Good enough I had to spend with them more time that I wanted to

Anyway, if it is possible in EL it will be possible in others. We will push things forward.

One technical - if you scalp small movements, do you scale if market goes against you or you wait for opposite move ?

 

[Don Bright]

I give up, you win...I will simply have to survive somehow....maybe my brother will let me get his coffee for him (the boys in the pits won't trust me with their lunches).

You go ahead and buy time decay, and I'll trade the equity markets, and we can exchange vacation pictures from the far reaches of our individual Empires.


But, before I fade into the Sunset...
Quote from Mav: Great, so now I got you and nomoreoptions away from trading options. LOL. Maybe I should be quiet, I'm hurting liquidity here. Don, I'm going to go out on a limb here, options were never your forte` were they? Admit, you followed your brother down to the floor and carried his handheld for him and occasionally picked up lunch for the guys in the pit. LOL.

______

I wish I had simply followed my brother, he left me for Chicago in 1982, leaving me to my own devices for 8 years while he slurped up all the money from the CME and CBOE. I did manage some $100K months to keep me going, and one $100K day (crash day of 1987)....which allowed me to muddle through.

Still shoulda gone to Chicago where the edge was (back then).

Let me know when you come to Vegas, we can chat over dinner (I'll buy)...

Don

 

[Maverick74]

Quote from Don Bright:

I give up, you win...I will simply have to survive somehow....maybe my brother will let me get his coffee for him (the boys in the pits won't trust me with their lunches).

You go ahead and buy time decay, and I'll trade the equity markets, and we can exchange vacation pictures from the far reaches of our individual Empires.


But, before I fade into the Sunset...
Quote from Mav: Great, so now I got you and nomoreoptions away from trading options. LOL. Maybe I should be quiet, I'm hurting liquidity here. Don, I'm going to go out on a limb here, options were never your forte` were they? Admit, you followed your brother down to the floor and carried his handheld for him and occasionally picked up lunch for the guys in the pit. LOL.

______

I wish I had simply followed my brother, he left me for Chicago in 1982, leaving me to my own devices for 8 years while he slurped up all the money from the CME and CBOE. I did manage some $100K months to keep me going, and one $100K day (crash day of 1987)....which allowed me to muddle through.

Still shoulda gone to Chicago where the edge was (back then).

Let me know when you come to Vegas, we can chat over dinner (I'll buy)...

Don

Now, now Don, don't get defensive here. I'm happy to here you made so much money at the CBOE. I do know one thing, during the crash of 87 there is no way you made 100k in a day being short gamma!!!! LOL. I'm happy to hear you were successful there. I am just pointing out the flaws in your option thinking. And Don, they are pretty big flaws. But it is not my intent to berate you. I just wanted you to give an example of how you traded taking so much risk. Guys that trade options are generally looking to lay off risk, not absorb it.

But I will accept that free dinner next time I'm out in Vegas.

 

[Don Bright]

Quote from Maverick74:



Now, now Don, don't get defensive here. I'm happy to here you made so much money at the CBOE. I do know one thing, during the crash of 87 there is no way you made 100k in a day being short gamma!!!! LOL. I'm happy to hear you were successful there. I am just pointing out the flaws in your option thinking. And Don, they are pretty big flaws. But it is not my intent to berate you. I just wanted you to give an example of how you traded taking so much risk. Guys that trade options are generally looking to lay off risk, not absorb it.

But I will accept that free dinner next time I'm out in Vegas.

You're welcome to come to dinner, yet I won't accept what you label "flaws" I label it "risk reward"...and, yes, things were a bit different then...we had a tremendous edge, so the risk was far outweighed by the rewards.

And, yes....on Friday before the crash, I ran my sheets and found that I was delta long (I hate that) about 5,000 CPQ computers....so I stopped in the pit on my way out to play blackjack for the weekend in Lake Tahoe, and saw 500 near the money puts in the book. I first bought 100, then said screw it, and bought all 500 for a quarter each. I sold the first 100 for 4.00 , and up from there.....Not "greed" just "fear"..fear of being long delta's, not long gammas (which worked that day, and I figured that I could always sell thm back for 3/16 come Monday if I needed to.

See you in Vegas....

Don

 

[vega]

How's this for irony. Two separate people that made there careers on an outtrade. First was a guy at Prudential that put an order in his personal acct to buy 20 big spoos (when it was still $500/pt) shortly after the market opened, he got a call from his broker 10 minutes later saying he messed up (the broker sold not bought) and said he could keep the trade or cover and buy back 40. He let it ride, made a ton of dough, and when his bosses found out he was short when the market tanked, in his personal acct nonetheless--he got a HUGE raise and promotion !! Second, and Don you or your bro may remember this if you were near the OEX back then. A local made a trade with the "book" buying what he thought was 100 out of the money puts for a "teeny," (that's 1/16 of a dollar or $6.25 per contract for those that don't know the floor lingo). I'm not positive if it was when outtrades came out later that day, or the following morning that he learned of his windfall. Turns out that it wasn't 100 puts, it was 1000 !!!!!!!!!! The book was incapable of showing all 1000 for the size !!!!!! The guy was longer 900 puts that he thought !!!!!!!!! Needless to say he cleaned up, and essentially has been set for life ever since. These two stories are the reason that outtrades always go against you. Everything has to even out in the end, and if these 2 took millions out of the outtrade pool, the rest of us are stuck filling it back up:eek: :eek:

Vega