CME options melting fast !

[cnms2]

"Doubling down" is a risky strategy, and should be used only if it was part of your initial plan when you opened your trade. Also, it should be used only on non-trending stocks and time frames (i.e. swing trading the SPX), which doesn't seem to be CME's case ...

Quote from hellomarket:

I know , I am experimenting with doubling down with options if the stock hasn't moved decisively the opposite way or the reasons for the trade are still there AND there is a few weeks left to expiration. I think it makes sense . As I said we will see what happens in the next 2 weeks. In this case an extra $20 could allow me to get out even. So it's worth it IMO.
Otherwise I try to cut losses at 50% but in this case it went so fast in 2 days or so it had gone past my cutoff point and the stock had not really moved against me

 

[cnms2]

Maybe I misunderstood you, but the idea is to sell options that have high IV. When IV is low, usually you end up better just buying the long leg, if you did your homework on forecasting the direction of the underlying.

Probabilities have to be considered together with the potential reward and potential risk, which leads to calculating the expectancy. The high probability of the OTM credit spreads comes with low premium and high slippage. One large looser can eat a lot of small winners, and even with good money management sometimes you can't avoid it.

You can't avoid doing your homework to forecast the underlying's price and the options' IV over your trade's time frame.

Quote from volatilitypimp:

hellomarket. Use the time decay and relative low volatility in your favor. Sell out of the money credit spreads. Sell the put spread roughly 30 points otm, and ditto for the calls. better known as the iron condor.

I have a -400p/+390p spread initiated for $1.45 credit. then i sold the -470c/+480c for $0.95. My hope is that CME will trade btween 400 and 470 by apr expiry 4.21.06. with low IV, expected range is pretty tight, plus earnings(gap risk) is minimal.

Since my max risk is $7.60 I have contingent OTO(one trigger other) order with my broker to buy back the spread if short strikes are violated.

These types of plays give you 75%-80% probabilities and you'll win more than you lose, the key is to not let your losers go.

 

[volatilitypimp]

Quote from cnms2:

Maybe I misunderstood you, but the idea is to sell options that have high IV. When IV is low, usually you end up better just buying the long leg, if you did your homework on forecasting the direction of the underlying.

Probabilities have to be considered together with the potential reward and potential risk, which leads to calculating the expectancy. The high probability of the OTM credit spreads comes with low premium and high slippage. One large looser can eat a lot of small winners, and even with good money management sometimes you can't avoid it.

You can't avoid doing your homework to forecast the underlying's price and the options' IV over your trade's time frame.

Good point. That was actually a concern of mine going into this trade, because I'm bullish on IV, although event(earnings) won't happen before apr expiry. Wouldn't you agree that this is one of the times I can ignore IV to a certain extent? I see your point tho, low premium and high slippage is far from an optimal trade. I asked a few people about this, and I basically got a deer in headlight looks.Shit, options trading is not an easy game bro.

:eek:

 

[Rearden Metal]

Quote from optioncoach:

You might learn a lot more from taking the loss then having your lottery ticket bail you out at even... trust me on this one....

Dead right.

Hellomarket, your current situation is a great example of what I believe is the most costly trader mistake of all. It's a tar-baby trap that even career traders with years of experience still fall into.

You're turning a small loss into a much bigger one by over-focusing on your entry price, and hoping to get back to breakeven.

<b>The market does not know or care where you got in!</b>

'Being up' or 'being down' on a position shouldn't ever change the way you trade it. The market has no idea where you got in. You'd be better off trading your existing positions after wiping clean any memory of entry price from your mind. Would you trade out of this position differently if your unrealized P/L was slightly green? If the answer is yes, you're doing it all wrong.

Sure the advice above is priceless to a trader, but I'm not afraid to share it with the competition. It's not like anyone is going to actually listen- that would go against basic human nature.