Discuss: I've seen backspreaders go broke as often as naked option sellers.

[OddTrader]

Please comment on: "I've seen backspreaders go broke as often as naked option sellers."
- http://www.elitetrader.com/vb/showthread.php?s=&postid=2102218

 

[ForexForex]

That's an old thread. I thought IluvVol's posts were very good.



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[spindr0]

What's so hard to comprehend? If one does most any strategy position in real size and the worst possible scenario for the position occurs, would you expect a good result ?? Add in a dose of money mismanagement and you're really cookin your goose.

 

[nazzdack]

Quote from OddTrader:
Please comment on: "I've seen backspreaders go broke as often as naked option sellers."

1) Premium sellers can go broke from a single, gigantic loss. It's death by the guillotine. :eek:
2) Backspreaders can go broke from taking lots of losses before a gigantic profit occurs. It's death by one thousand cuts.

 

[OddTrader]

Quote from OddTrader:

Please comment on: "I've seen backspreaders go broke as often as naked option sellers."
- http://www.elitetrader.com/vb/showthread.php?s=&postid=2102218

According to McMillan, "The strategist must be alert to the possibility of early exercise in this type of spread, since he has sold a call that is in the money."

My guess: Probably any uncommon combination of uncommon volatility and uncommon leverage would kill while trading with common knowledge!