I would just close it out and next time make a trade that does not involve the possibility of losing a large amount of money easily . Never liked credit spreads because the OTM parts decays so fast as to be useless. May as well just sell naked fewer contracts.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
How to hedge credit spread option strategy?
- Thread starter kyliebrow786
- Start date
I would just close it out and next time make a trade that does not involve the possibility of losing a large amount of money easily . Never liked credit spreads because the OTM parts decays so fast as to be useless. May as well just sell naked fewer contracts.
Also, you are buying overpriced vol in the wings as a "hedge".Never liked credit spreads because the OTM parts decays so fast as to be useless. May as well just sell naked fewer contracts.
Hi
Spx Naked strangle 2335/2515 maximum profit 700 , margin required 43.600 so the profit is 1,6 % of the margin
Iron cndor 2330/2335/2515/2520 maximum profit 60 , margin required 500 so the profit is 12 % of the margin
It seems clear what of the two strategies is more eficient in terms of the use of capital.
So the otm hedge isn't completly useless, it seems.
Spx Naked strangle 2335/2515 maximum profit 700 , margin required 43.600 so the profit is 1,6 % of the margin
Iron cndor 2330/2335/2515/2520 maximum profit 60 , margin required 500 so the profit is 12 % of the margin
It seems clear what of the two strategies is more eficient in terms of the use of capital.
So the otm hedge isn't completly useless, it seems.
Hi
Thanks for your feedback @ironchef
I think I almost have a solid strategy. But I had to go into the details of the each specific underlying, and still have much to do. A forum like this really helps. But yes, I have observed it is not common to give specific recipes.
Thank very much you for the advices.
Regards
Thanks for your feedback @ironchef
Yes I am, only since March trading options. A lot of learning during this time, mainly in the practice part, broker and more. I've been early assigned much times and autoliquidated a couple, and each time I have learned something. I think that's the important now.If you are new to options,
I think I almost have a solid strategy. But I had to go into the details of the each specific underlying, and still have much to do. A forum like this really helps. But yes, I have observed it is not common to give specific recipes.
Thank very much you for the advices.
I almost don't believe you. Your posts reflex high trading knowledge. Buying a future with a stop loss has the same risk profile than buying a call, butyou don't have to pay a premium. So I think it can be an alternative for directional players. But obviously you won't be able to take advantage of an increase of volatility. One of the advantages of buying a call instead of a future is that you can forget about the stop, and you have time before you realize a loss. Yes it's a little different.To be honest, I have no idea how to trade futures.
Regards
You should not believe anything you read in an internet forum, you need to verify everything by doing your own vetting.I almost don't believe you. Your posts reflex high trading knowledge. Buying a future with a stop loss has the same risk profile than buying a call, butyou don't have to pay a premium. So I think it can be an alternative for directional players. But obviously you won't be able to take advantage of an increase of volatility. One of the advantages of buying a call instead of a future is that you can forget about the stop, and you have time before you realize a loss. Yes it's a little different.
Regards
I only trade single leg equity options, both long and short, made fairly concentrated bets. As for trading knowledge, I only know enough to trade my single legs. I am desperately trying to understand risk management to reduce my risks. I don't understand futures so won't touch it.
Also, I am trying to read up and get advice here on direction neutral strategies (gamble on direction is a risky proposition), e.g., volatility, delta hedge, multi-leg trades... So far my trades on these were very disappointing to say the least.
Best wishes and thank you for your interest. Please stay around.
When I started, I traded very very short duration options (with the mistaken view that the premium were relatively rich) with disappointing outcomes. A very kind poster drcha, suggested I went a little longer duration because they had less noise. It made quite a bit of difference for me.Yes I am, only since March trading options.
I don't know how you trade, what you trade and don't really want to know, but if your trades were short duration and you are new, you might want to try a little longer expiry.
ditto..I like to go 150+ days out. Everyone focuses on the 30-day ones but when the premiums are low it is very easy to get blown-out. 150+ day options when sold still decay fast and have much more wiggle room. One nice thing about long-dated option is that the IV falls as expiration nears. ATM IV for 30 day options is 7 but it's 13 when you go out 200+ days
ditto..I like to go 150+ days out. Everyone focuses on the 30-day ones but when the premiums are low it is very easy to get blown-out. 150+ day options when sold still decay fast and have much more wiggle room. One nice thing about long-dated option is that the IV falls as expiration nears. ATM IV for 30 day options is 7 but it's 13 when you go out 200+ days
Thanks all, for an excellent thread. What a pleasure --and it stands out in the "strange world of ET."
Thank you so much for your response. It's a great help.
Yes you are right, we should not believe in everything that we see or read in Internet. We should first do it by ourselves and then see where we go wrong or how we are doing it right.You should not believe anything you read in an internet forum, you need to verify everything by doing your own vetting.
I only trade single leg equity options, both long and short, made fairly concentrated bets. As for trading knowledge, I only know enough to trade my single legs. I am desperately trying to understand risk management to reduce my risks. I don't understand futures so won't touch it.
Also, I am trying to read up and get advice here on direction neutral strategies (gamble on direction is a risky proposition), e.g., volatility, delta hedge, multi-leg trades... So far my trades on these were very disappointing to say the least.
Best wishes and thank you for your interest. Please stay around.