5 more years of trading:
- $3,194,775
$5,737,356
$10,303,468
$18,503,548
$33,229,713
How to make decent $ with conservative vertical spread?
- Thread starter a529612
- Start date
Personally, I think nekkid is underrated 
Tax free account?
You would have to check with FT79, he is the one that gets these easy 5% monthly returns. But I assume a retirement account would be tax free, I know in Canada they are until you withdraw.
I would appreciate if you read my posts before you post a reply, here is some copying and pasting
.......but ofcourse trading is not easy!!! I have lost a lot of money, I have made a lot of money when trading. I have found my comforts trading covered selling of options because I don't have to know what the market is doing but only manage the positions (this is my system and it works for me). with current market volatility income generating strategies should be properly managed to minimize loses or still have a decent/small profit (there's no holy grail). Risk is the only important variable for me, profits will come if I manage my risk properly (important: my system and it works for me)......
........buy the book of Natenberg and Charles M. Cottle (Option Trading; the hidden reality) so you know the good/bad side of the mentioned strategies and start trading them with SPY with just 1 or 2 contracts to learn the craft, If you are profitable and felt the pain when thinks go wrong increase your size or start trading RUT, NDX, OEX (or if you from Europe like me DAX, DJ EuroStoxx50). Imho you should trade only one product so you get familiar with the product. IMPORTANT: have a plan and write it down (I have one till december 2008). Don't try a iron condor, calendar or diagonal, imho you should trade a portfolio and but them on every single month. Treat it as a business!!
when trading you should have a plan, who do I gonna make money this month trading (in my case) index options. I trade a portfolio of income generating strategies (IC, dubble Diagonals, Calendars, etc). In current markets an IC is horrible to manage but they belong in the portfolio. Although they are horrible you should but them on because they are part of the plan and will compensate the losses that could be generated with calendars (for example) when the volatility drops. So every single month I but them on.
Why not experiment with the idea of adding a directional bias to your trading? Selling strangles (sell DOTM call and also sell DOTM put) is nondirectional -- it gives you a psychological crutch, allowing you to proudly boast "I don't know which way the underlying is going to move and I don't care!"
But suppose that you did have a directional opinion; an idea about which way the underlying is more likely to move; a forecast. Then you could tilt your strangle selling; if your opinion is that the underlying will rise, sell more puts and sell fewer calls. If you forecast a decline, sell more calls and fewer puts. Or, use your forecasts to select strike prices: if bullish, sell DOTM calls but not-so-deep OTM puts.
Or if you forecast a rise, sell the puts naked and sell the calls as (limited risk) vertical spreads.
Or if you forecast a rise, sell a call vertical spread whose protection (purchased option) is Tight (expensive), and sell a put vertical spread whose protection is Loose (cheap).
How can you obtain a directional opinion? Lots of people do this every day: they trade the underlying (not the options) based on their opinion of where it will move. How do they do it? Many many of them use technical indicators; and some (not all!) of them are successful.
So I suggest that you spend some time experimenting with technical indicators to get a directional opinion. Try it out, backtest it in the computer if you can; fiddle with old charts; paper trade the idea; see if it works for you.
Right now you are using a technical indicator called "Null", which tells you there is a 50.00% chance the underlying will rise. You are responding to this forecast by selling 1.000 DOTM put for every DOTM call, and by selecting put strike = 1.000 times farther away as call strike. I suggest you substitute other technical indicators and adjust your trading strategy as appropriate.
But suppose that you did have a directional opinion; an idea about which way the underlying is more likely to move; a forecast. Then you could tilt your strangle selling; if your opinion is that the underlying will rise, sell more puts and sell fewer calls. If you forecast a decline, sell more calls and fewer puts. Or, use your forecasts to select strike prices: if bullish, sell DOTM calls but not-so-deep OTM puts.
Or if you forecast a rise, sell the puts naked and sell the calls as (limited risk) vertical spreads.
Or if you forecast a rise, sell a call vertical spread whose protection (purchased option) is Tight (expensive), and sell a put vertical spread whose protection is Loose (cheap).
How can you obtain a directional opinion? Lots of people do this every day: they trade the underlying (not the options) based on their opinion of where it will move. How do they do it? Many many of them use technical indicators; and some (not all!) of them are successful.
So I suggest that you spend some time experimenting with technical indicators to get a directional opinion. Try it out, backtest it in the computer if you can; fiddle with old charts; paper trade the idea; see if it works for you.
Right now you are using a technical indicator called "Null", which tells you there is a 50.00% chance the underlying will rise. You are responding to this forecast by selling 1.000 DOTM put for every DOTM call, and by selecting put strike = 1.000 times farther away as call strike. I suggest you substitute other technical indicators and adjust your trading strategy as appropriate.
Writing a strangle is a directional play. The proper "boast" for that position is "I don't know which way the underlying is going to move, but I hope it doesn't."
"Nowhere" is as much a direction as "up" or "down", since your strangle loses money when the stock moves other than in that direction.