I have never seen that format before (JulWk2, Jul15, JulWk4, and JulWk5). I'm with BMO InvestorLine and they use this format: 2015JUL10
There is no need for you to get so defensive and hostile, it was just a simple question about the expiry.
FXI
- Thread starter rmorse
- Start date
I have never seen that format before (JulWk2, Jul15, JulWk4, and JulWk5). I'm with BMO InvestorLine and they use this format: 2015JUL10
There is no need for you to get so defensive and hostile, it was just a simple question about the expiry.
If you draw the hockey stick diagram you will see they are the exact same: a debit call spread is equivalent to a credit putspread.
The only difference is the early exercises for dividends on the call spreads. This is the realities of trading vs the theoretical you mentioned above.
Sure, I might have the shares called away, but my broker will exercise the long leg to cover in that event. I pay attention to (scheduled) dividends, regardless. Doesn't mean a surprise won't occur, but it's rare.
In my world, I am much more comfortable with the fact that the short leg can never be ITM when the long leg is OTM. I sleep better at night.
In my world, I am much more comfortable with the fact that the short leg can never be ITM when the long leg is OTM. I sleep better at night.
Equally true for OTM. Suppose an illiquid option is $1- $2, fair value $1½, then retail offers $1½ and mms don't want it for no edge, so they leave it alone. Now it's quoted $1- $1½ but fair value is still $1½, not $1¼.
Re: Put Debit Spread vs Call Credit Spread
Below is jimmyjazz's Put Debit Spread compared to its equivalent Call Credit Spread, both positions have roughly the same risk:reward. Your sleep at night should be just as good with both positions - they are identical.
NOTE: I do not endorse debit/credit spreads. The above positions are for comparison purposes only - it is not a trade recommendation.
Below is jimmyjazz's Put Debit Spread compared to its equivalent Call Credit Spread, both positions have roughly the same risk:reward. Your sleep at night should be just as good with both positions - they are identical.
- Put Debit Spread
- Buy FXI July 17, 2015 42.50 Put at $1.06 (current ask)
- Sell FXI July 17, 2015 42.00 Put at $0.82 (current bid)
- Debit $0.24
- Call Credit Spread
- Sell FXI July 17, 2015 42.00 Call at $1.59 (current bid)
- Buy FXI July 17, 2015 42.50 Call at $1.34 (current ask)
- Credit $0.25
NOTE: I do not endorse debit/credit spreads. The above positions are for comparison purposes only - it is not a trade recommendation.
I would like to add some important info I left out in my post #36 above.
When jimmyjazz entered his 42.00/42.50 Put Debit Spread for a debit of $0.40 the credit for the 42.00/42.50 Call Credit Spread would have been about $0.10. As you can see the P/L on both positions moves together.
When jimmyjazz entered his 42.00/42.50 Put Debit Spread for a debit of $0.40 the credit for the 42.00/42.50 Call Credit Spread would have been about $0.10. As you can see the P/L on both positions moves together.
The "sleep at night" issue has nothing to do with P/L. It has to do with whether or not one is worried about an ITM short leg getting exercised and the corresponding ramifications. Do your own homework on that one.
As far as your examples are concerned, congratulations, you showed that debit spreads and credit spreads have roughly equivalent P/L diagrams. But you ignored 2 things:
(1) your own math shows the debit spread as being more profitable
(2) you're assuming the long leg is bought at the ask and the short leg is sold at the bid. This is not remotely close to reality. I could turn both of those trades for ~ $0.30/$0.20.
For someone who is so tuned into B/A spreads, I'd think you'd care about that penny on the 2 examples you showed, but you're not about to address that, or expectancy, so good luck.
Oh, by the way: congratulations on not placing your 100% loser trade on FXI. I have a week to go. See you in the petting zoo.
As far as your examples are concerned, congratulations, you showed that debit spreads and credit spreads have roughly equivalent P/L diagrams. But you ignored 2 things:
(1) your own math shows the debit spread as being more profitable
(2) you're assuming the long leg is bought at the ask and the short leg is sold at the bid. This is not remotely close to reality. I could turn both of those trades for ~ $0.30/$0.20.
For someone who is so tuned into B/A spreads, I'd think you'd care about that penny on the 2 examples you showed, but you're not about to address that, or expectancy, so good luck.
Oh, by the way: congratulations on not placing your 100% loser trade on FXI. I have a week to go. See you in the petting zoo.
Quoted bid/ask on the spread I purchased was $0.25/$0.54, and I bought within seconds at $0.40, so I don't know what to tell you. I do not filter other than I try to find the best expectation with the short leg probability ITM > 80%. I am just not the kind of guy who can stomach losses well. My weakness is clearly trade management, and although I am working on it, it helps to focus on high probability trades with positive expectation.
This begs the question -- why don't those of you who are criticizing my method address expectation? It is highest for DITM spreads. Do the math.
This begs the question -- why don't those of you who are criticizing my method address expectation? It is highest for DITM spreads. Do the math.