How good your market neutral credit spread strategy ?
- Thread starter nell
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Thx for the comment buddy !
Regarding "the edge" that we're talking about, is it the same with "point of view". So we can make the question like this "From what point of view, you make Iron Condor position ?"
If yes, so my explanation before is answering the question. My reason doing IC every month because i see good probability that they're hardly go over 10% every month, and if you said "options" only the tools. I think I treat the "options" also only as the tools to make profit to me. The instrument that allowed me to be a market neutral is only "options" as far as i know-so i use options with that.
Regarding your statement that I don't need 90% winning ratio and you said that An iron condor month after month will eventually lose money. What is your reason to said that ? do you have any research and supporting data for that ? I like to know-because it's my main strategy.
As far as i know, in my problem. The key-if I can use the IC in the ranging market (not to volatile) i will make good compounded profit. but the problem, how can i know next month the market will be volatile or not
(anyone can teach me how to analyze this ? )
Nell,
If the IC is your main strategy and you depend on it for a living, you must treat it as a business & learn as much as you can about the intricacies of the greeks and and trading as a whole. This and understanding the pyschology of trading will see you through the tougher times.
Good Luck
If the IC is your main strategy and you depend on it for a living, you must treat it as a business & learn as much as you can about the intricacies of the greeks and and trading as a whole. This and understanding the pyschology of trading will see you through the tougher times.
Good Luck
Dude, having traded options for years now I can only tell you that calling credit spreads/iron condors/and all the like low-risk is absolute bullocks. Point is when markets go bersek as they did, you are gonna get absolutely killed. Its not any much different than riding into this storm short gamma or short vega on longer expiries. Believe me, its hard to find in the professional ibank trading environment ANY seasoned options trader who survived till this day by actively writing options. THe same with your "strategy", its a flawed idea because your gamma/vega profile completely reverses when the underlying trades away from your "side strikes".
I would spend a lot more time researching ideas that identify underlyers that will exhibit higher realized volatility and go long gamma those names. You can sell some longer exp. index vol against it if you want to stay "net vega neutral". Beware, this is also not a trade that may work on the first day and especially takes few days to kick in during market turmoil as index vol generally reacts faster than ss vol. Why? Because single stock vol in the OTC market completely dries up when markets go upside-down while index vol still trades, also I would expect structured flow to be anything but dead right now which will also make ss vol stickier than during calmer times.
Forget those "stable income generating" credit spread ideas, they are complete non-sense. They get you couple pennies during peace times ans completely rip the throat out of you when things get windy.
Just my 2 cents.
I would spend a lot more time researching ideas that identify underlyers that will exhibit higher realized volatility and go long gamma those names. You can sell some longer exp. index vol against it if you want to stay "net vega neutral". Beware, this is also not a trade that may work on the first day and especially takes few days to kick in during market turmoil as index vol generally reacts faster than ss vol. Why? Because single stock vol in the OTC market completely dries up when markets go upside-down while index vol still trades, also I would expect structured flow to be anything but dead right now which will also make ss vol stickier than during calmer times.
Forget those "stable income generating" credit spread ideas, they are complete non-sense. They get you couple pennies during peace times ans completely rip the throat out of you when things get windy.
Just my 2 cents.
Quote from nell:
Hi guys,
I'm in my thirty right now, and wants about make living from trading. My previous work is self employed, I have some trading (the real trading) business - anyway, i have seen Stock trading is the best way and I focusing in this right now.
I just want to know, who's using credit spread as their strategy month to month and compounding them ?
I use Iron Condor, and use them for a nice whole year, until recently my accounts blew up
It took my whole profit + 15% loss from my whole capital. It's around $20,000 loss up to now. Damn !!
My Iron condor criteria, i always using probability of touching 90% (based on IV), if you using TOS - you will know that. Usually the range between strike price and current price is about 10% And target for 6%-10% profit only.
Most of the time i let it expired worthless, because with my target only 6%-10% it hard for me to close it 10 days before expiration and else I already do a backtest, I calculate month to month highest close-lowest close and it rarely exceed 10% ranging.
If it's close/touch to my strike price, most of the time i roll it down around 5% of the strike price to lower the loss. I never let it go below my strike price whatever the market issue is. And most of the time is works
I usually trade with index RUT/SPX/NDX - and some IWM/SPY/QQQQ/DIA/DJX.
I have a nice profit during 8-9 months and I compound it step by step, I think i already get around 50%-60% profit because of my compound. Yes, there's some lose, but entirely my portfolio was good, if I loss 1-2, i still win on the other.
My blue print plan is, I know within 1 year - I will loss 1-3 times eventhough my Iron condor is high probability strategy, I already prepare to risk 30% of the margin of each stock, and based on my calculation - it still give profit for a whole year.
But this month, i blew up - i only use half of my money, but I loss around 70%, it sucks man !! It's because panic selling (only in a week, most of index go down more than 10% and it makes me to close/roll down my put spread). Honestly, I put my emotion too that time, and let fear controlling me.
The things right now, I'm about to make living from trading. But the time I want to start, my accounts blew up. I confuse right now, i decide to not trading anything from now. But who's paying for my living cost ?
The best way is i trade again, but with my current mindset and my emotion i need time to gain more confidence and clear my mind.
What is the best credit spread strategy that give consistent profit (eventhough it's small) with high probability ?
What do i need to trading for living ? I know I must eliminate emotion and to be discipline, i already apply that.
I have loss my confidence right now, but i still believe i can make living from trading
What must i do right now ?
I want to ask some advice with you guys, most of you more professional and more experience.I only need positive advice, please do not give any comments if you are only want to pick a fight and just to make me down. My future depends on this.
I think i need input from you, especially those who already do trade for a living from your own pocket money (not a broker/fund manager/etc), I want to learn from you as I about to start.
Hope get the best from you !!
I don't agree.
If risk is the trader's number one priority; if the trader is willing to lock in losses as necessary, if the trader does not feel the need to pray the market reverses direction and refuses to cover a losing trade, then buying iron condors is a long-term winning proposition.
And that even more true for traders who are willing to own insurance (extra naked long straddles).
Profits come easily and often. But losses can destroy the iron condor buyer. If the trader has a loss limt and practices discipline and good risk management, that is the key to long-term success.
People who open positions and wait until expiration arrives to see how well they did are not going to survive . If those are the people to whom your comments are directed, I agree with you.
But anyone can learn to adopt prudent risk management. it's a topic I stress in my book, <i>The Rookies Guide to Options</i>.
Mark
http://blog.mdwoptions.com/options_for_rookies/
THanks for the advertisment, we all love it and surely buy your book. Sounds like you pushed the iron condors especially hard. I dont know how long you have been actively trading options, if you ever even market-made options. If you ever traded for a prolonged period of time then you will know that at times such as now the vol explosion can completely rip apart your iron condor strategies. Your gamma profile will look horrid when things get really stinky as they did. You are telling us on one side that with prudent risk management those strategies can be all than a success. You know very well that nothing comes for free, why wont you walk us through the risk in this strategy because this would very well support my earlier post. I am not trying to piss on you but you call this a next to no risk strategy and I simply disagree saying this strategy has lost ANYONE during last week. What would have happend if the markets did not snap back, if things would have gone south for another 5-10%? I saw enough guys getting killed by seemingly low-risk strategies (I am not claiming that a long iron condor would ruin anyone). Problem is the profiles in a strategy such as this one gets completely whacked in market moves such as the one in the past week. Each strategy has its place but please dont tell us that an iron condor would have performed better than a long straddle last week. I dont see a lot of use for iron condors as stand-alone strategies (it can be a great net profile for a whole options book if employed in the right environment), a multiple of the little you make on those can be taken away in market moves such as last week.
I started dabbling with options 30 years ago and began serious day trading 5+ years ago, shifting more and more away from options to equities. AFAIK, it's very hard to make a living solely from this, well, at least until this year. Having been more on the short side than long for most of the year, I've had the year that I've always dreamed about.
So although I'm an Pattern Day Trader (PDT) of equities, many lessons learned apply to both options and equities.
1) Manage your risk (a HUGE edge)
2) Repeat #1 hundreds of times and live it.
3) Trade from both sides (long and short)
4) Stop loss really good profits or adjust them so that a good chunk of them are locked in and thus a reversal can't take them away.
5) Book gains, possibly hold/roll paper losses when in offsetting positions. Reversals will add to your gains if you get one. Never do the opposite (book the loss, hold the paper gain). OK, never is harsh. Try: almost never.
Hundreds of small losses can be offset by tens of moderate gainers. Some big winners then really make a world of difference.
Get your ego out of the process. If the trade is moving against you, get out of the way. You're wrong. Period. Accept it. Forget it. Move on. Find a better trade or the peace of mind of the safety of cash.
Trade within your risk tolerance.
Shift your bias as the market shifts - probably a lot easier with day trading since each day the direction is known until the reversal snags you. and when it does, book profits, cut loses, reverse direction.
When the market settles down and volatility dissipates, I'm going back to watching soap operas and drinking beer all day (g).