Credit Spreads - Reasonable Returns?
- Thread starter fakie99
- Start date
I would like to give some input on this.
First of all I have been away for a while re-couping after a big lose last year. (Greed got the best of me and I over traded).
But that being said I have been trading the NDX options with a Credit spread the last 2 months.
What I look for is on the the last trading day (usually Thursday) I look to buy the long call 100 pts away from current price.
Watch a live chart of the NDX with a Standard Deviation Channel. Buy the option on a dip near the bottom channel. This has been happening within 90 min of opening.
When the price on the chart pulls back to near middle of the channel I then SELL an option to create the spread. (ex. buy the 1800 and sell the 1775).
Last month (Mar exp) I made 11.7%.
Feb exp I made 16%.
Greater than 10% return is reasonable on this spread.
I will be sitting by and waiting out the time until the April exp comes up.
You can do this on either side of the market, just replace the calls with puts.
First of all I have been away for a while re-couping after a big lose last year. (Greed got the best of me and I over traded).
But that being said I have been trading the NDX options with a Credit spread the last 2 months.
What I look for is on the the last trading day (usually Thursday) I look to buy the long call 100 pts away from current price.
Watch a live chart of the NDX with a Standard Deviation Channel. Buy the option on a dip near the bottom channel. This has been happening within 90 min of opening.
When the price on the chart pulls back to near middle of the channel I then SELL an option to create the spread. (ex. buy the 1800 and sell the 1775).
Last month (Mar exp) I made 11.7%.
Feb exp I made 16%.
Greater than 10% return is reasonable on this spread.
I will be sitting by and waiting out the time until the April exp comes up.
You can do this on either side of the market, just replace the calls with puts.
Out of curiosity, I looked at your previous journal which you stopped updating - I assume you blew out? And from your past post, you also blew out twice? Am I correct in stating you blew out 3x already doing credit spreads?
Quite honestly, I think aiming for 10% or more on credit spreads is quite dangerous and even though you may even have a good year of gains, you're always a few steps away from blowing out. When volatility jumps, bid/ask spreads tend to go wide open and it's very expensive to cover a losing position.
I do hope you continue your performance but know that aiming for 11% every month is risky, no matter how you play it - unless you have a crystal ball that is
But, to each his own I suppose.
Quite honestly, I think aiming for 10% or more on credit spreads is quite dangerous and even though you may even have a good year of gains, you're always a few steps away from blowing out. When volatility jumps, bid/ask spreads tend to go wide open and it's very expensive to cover a losing position.
I do hope you continue your performance but know that aiming for 11% every month is risky, no matter how you play it - unless you have a crystal ball that is
But, to each his own I suppose.
QFT
The Daytrading was the "Account Killer", not the credit spreads.
It is amazing how GREED will make you overtrade, when all you have to do it sit back and let the market work for you. I'ts boring, but it works...
For now slow is better. If it does not look like a trade will work on the Last Day to Trade, I will not take it.
It is amazing how GREED will make you overtrade, when all you have to do it sit back and let the market work for you. I'ts boring, but it works...
For now slow is better. If it does not look like a trade will work on the Last Day to Trade, I will not take it.
Quote from polpolik:
Out of curiosity, I looked at your previous journal which you stopped updating - I assume you blew out? And from your past post, you also blew out twice? Am I correct in stating you blew out 3x already doing credit spreads?
Quite honestly, I think aiming for 10% or more on credit spreads is quite dangerous and even though you may even have a good year of gains, you're always a few steps away from blowing out. When volatility jumps, bid/ask spreads tend to go wide open and it's very expensive to cover a losing position.
I do hope you continue your performance but know that aiming for 11% every month is risky, no matter how you play it - unless you have a crystal ball that is
But, to each his own I suppose.
I am a novice option trader with a small account, currently trading credit spreads/iron condors on IB, primarily with SPY options. When I calculate my returns using the net credit/(margin required -net credit) formula, I am getting returns over 30% for each of the last few months.
Now experienced traders on ET, not to mention guys like Cottle, are telling me 3% per month is reasonable so I am led to believe my returns are beginner's luck and unsustainable.
However, I find it difficult to understand how an 'adverse move' would 'instantaneously wipe me out.' SPY would have to move +10% or -10% literally overnight to push my current April condor spreads to that Max Risk zone and 1) my losses would erase my profits from the last 2 months only and 2) in the current climate, the Fed etc freak out if the SPY drops 4% in one night.
So while I am cautious about what I'm doing, I'm also a bit more ambitious than 3% monthly.
Am I missing something?
lejmorro -
can you post the specifics of one or two of the last IC or spreads you did? i would like to see if i caculate 30%+ returns for your trades. i, too, have been looking at setups on indexes and stocks that show me a 15-20% return at pretty good probability of success. but, the feedback i have recieved here leads me to think i am either calculating wrong or looking at spread trades that have real nice returns, but very little chance of succeeding.
Lej, I must have mistaken the OP's question to be return on actual account value. I wasn't saying 3% on margin used. I meant 3% of actual account value would be a reasonable profit target.
Which basically means, collecting about 3-4k of credits per 100k account size would be reasonable.
thanks......a couple of things stand out to me even without doing caculations. i think qqqq was trading at around 44 when you put this IC on back on 1/28. the strikes you chose are pretty tight - 38-42 on the low side, 46-50 on the high side. that means that the underlying need only move 2 points in either direction to hit your short strikes. although with strikes that tight, the premiums are better. i do not know the probabilities of that trade, but that tight a set of strikes would make me nervous. (did you leave this trade in place or get rid of it early?) anyway, that is a great return and it looks like you actually did OK. also, i noticed you planned on this trade for about a month and a half (1/28 - mar expiration). again, i think premiums are better in the longer time frame, but i tend to do spreads only with less than a month to go til expiration. personal prefernce i suppose - it just makes me nervous as hell to leave a spread on for that long in this damn market.