Diagonals versus Vertical Spreads

K

kalikahuna

So...I wanna hear people opinions on the two


I have been doing vertical credit spreads for a while with a lot of success...but from what i gather in these boards and from books, many like diagonals better because the long position retains value and could even make money...and if it does move in your directions by the right amount, you make WAY more money.

However, it seems like it is very easy to not make money if the underlying stays put or moves against your position...where as the vertical makes move if the underlying stays put, moves against you or moves slightly towards your position


Lemme hear people opinions over why one is better than the other...personally, I'm attracted to the bigger money of diagonals, but more comfortable with verticals.
 
Don't debate! Concentrate! Stick with what you're comfortable with and increase your position size if indeed you've been successful with a certain strategy.
 
One is not better than the other, one may be better for your style of trading and risk tolerance. Comparing strategies to ask which is better is a pointless exercise.

If you want to learn about verticals and diagonals then look at the SPX Credit Spread Trader thread under Journals where both strategies are discussed at length.
 
Quote from kalikahuna:

So...I wanna hear people opinions on the two


I have been doing vertical credit spreads for a while with a lot of success...but from what i gather in these boards and from books, many like diagonals better because the long position retains value and could even make money...and if it does move in your directions by the right amount, you make WAY more money.

However, it seems like it is very easy to not make money if the underlying stays put or moves against your position...where as the vertical makes move if the underlying stays put, moves against you or moves slightly towards your position


Lemme hear people opinions over why one is better than the other...personally, I'm attracted to the bigger money of diagonals, but more comfortable with verticals.
More...

Diagonal has a narrower profit range, and your prediction must be very precise. Credit spread has a wider profit range, and so usually a lower return, and a higher probability of making a profit. Actually, you can increase your return with credit spread by using CTM options.

It all comes down to your market prediction, and your risk tolerance.
 
Bottem line...what every one else has said...if you are successful at what you are doing...stick with it. Don't try to fix what ain't broke. If you have been successful why even ASK?
 
Quote from RichardRimes:

Bottem line...what every one else has said...if you are successful at what you are doing...stick with it. Don't try to fix what ain't broke. If you have been successful why even ASK?
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The problem is we are very greedy. Thats why we trade.
 
yip pretty much hit it on the head....GREED!

Just because you are successful at one system doesn't mean you shouldn't try to compare it to others and see if you can find a better one...without acting on our desires to try new things and better our already "decent" situations, we'd all still be living in caves and wearing animal skin loincloths, writing our opinions on stone tablets.

And, yes, i have been reading the SPX credit spread journal...which is what led me to comparing the two strategies in the first place...eh, I'll probably end up trying diags occasionally if I see a really good opportunity...right now tho...I have very little clue what's gonna happen the next day or couple days with the SPX.
 
Quote from yip1997:

Diagonal has a narrower profit range, and your prediction must be very precise. Credit spread has a wider profit range, and so usually a lower return, and a higher probability of making a profit. Actually, you can increase your return with credit spread by using CTM options.

It all comes down to your market prediction, and your risk tolerance.
More...

OK, I know ATM, ITM and OTM and even FOTM. What's CTM?

Count The Money?
 
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