FXI

[debitspread]

Risk and reward don't tell the whole story. You need to consider expectation. Your odds of profitability are much lower than mine. When I put on my debit spread, the expectation of FXI expiring below 42 ($10 profit) was 85%. The expectation of it expiring above $42.50 ($40 loss) was 9%. The expectation of expiring in between was 6% (call it $15 loss).

OTM-Options is right but for the wrong reason. It's nuts to trade ITM spreads wherein the bid/ask eats up much of the potential gain. There's no bang for the transaction-cost buck.

 

[jimmyjazz]

My purchase landed right in the middle of the bid-ask. oX has a "walk the limit" feature on spreads which actually works pretty well.

Furthermore, the bid-ask on a near-expiry ATM FXI put is over 15%, so it's not like there are no headwinds there, either.

 

[debitspread]

My purchase landed right in the middle of the bid-ask. oX has a "walk the limit" feature on spreads which actually works pretty well. Furthermore, the bid-ask on a near-expiry ATM FXI put is over 15%,

I realize you're impermeable, but anyway: bang-for-buck, deep ITMs are a poor vehicle choice, no two ways about it.

 

[jimmyjazz]

I realize you're impermeable, but anyway: bang-for-buck, deep ITMs are a poor vehicle choice, no two ways about it.

WTF does that mean? What reason have I given you to say that I'm "impermeable"? You don't know me from Adam.

I showed the expectation. I told you that hitting the middle of the bid-ask spread is not that difficult. Are you calling me a liar?

 

[debitspread]

WTF does that mean?

I meant, "rather than carefully thinking throught what I'm saying, you'll fire off a knee-jerk hostile & defensive reply," -- and I was right.

 

[jimmyjazz]

Please explain how expectation does not address risk & reward, bang for the buck, or whatever else you want to call it. I would honestly like to hear a rational explanation for not trading ITM debit spreads when they typically have the highest expectation. If you disagree with that statement, fine. Please elaborate.

And just to be clear, you went "asshole" first. Don't be surprised when people react defensively to insults.

 

[xandman]

Your midpoint for the bid/ask would not have been hit without being several nickels in favor of the mm.

 

[jimmyjazz]

Your midpoint for the bid/ask would not have been hit without being several nickels in favor of the mm.

All I can do is look at the bid/ask as reported and see where my fill was. It was smack in the middle. I'm sure the market makers took some too but as retail traders we can only work with what we see.

My expectation calculation includes the purchase bid/ask. It reflects the PRICE I PAID. Not some dumbass "paper trade" bullshit. I bought the spread for 40 cents. The expectation follows.

Is nobody willing to discuss the expectation? I'll grant that the calculation is model-dependent, but other than that, it sure seems a helluva lot more robust than "hey, I think this is gonna go down, I'll buy an ATM put and lambaste anyone who does anything different".

Fucking hell, this place is a beating.

 

[newwurldmn]

WTF does that mean? What reason have I given you to say that I'm "impermeable"? You don't know me from Adam.

I showed the expectation. I told you that hitting the middle of the bid-ask spread is not that difficult. Are you calling me a liar?

You will be better off trading the otm credit spread. They are equivalent but itm options have wider spreads to account for increased hedging exposure.

 

[rmorse]

I have found this to be true. And if the OTM credit spread expires OTM, you are good. If the ITM spread goes out with any part ITM, you have to do something or pay an additional fee for exercise and assignment.