HowardCohodas Index Options Credit Spread Trading Journal

Status
Not open for further replies.
I´m curious about the rollover with a 60 day option. Surely you would not expect 80% profit on the spread within the first month or weeks? I would guess that would be pretty tricky with the market capable of gyrating for up to 60 days on the spread. Time Decay and all that occuring mostly during the second month. I would think after sleeping on it last night that the market would be apt to catch you.

How has that worked out in practise for you Howard? It has been a BULL TREND, so I expect it has been fairly easy to plan for the trend. What has been your practical experience.
 
Howard

I´m probably too dumb to appreciate the technical jargon in trading. My view is that the simple way is best. I think a lot of people over analyze. The analysis gets in the way of trading. Taking a bet as it were.

20 years ago when we were all starting with Trade Station and all the new stuff, it was amazing how people could get bogged down in the GREEKS and other stuff. Not that in certain types of institutional trading it is not important. For the retail amateur trader, I more think you want some little trick you learn that works and just keep repeating it.
 
Quote from falconview:

I�m curious about the rollover with a 60 day option. Surely you would not expect 80% profit on the spread within the first month or weeks? I would guess that would be pretty tricky with the market capable of gyrating for up to 60 days on the spread. Time Decay and all that occuring mostly during the second month. I would think after sleeping on it last night that the market would be apt to catch you.

How has that worked out in practise for you Howard? It has been a BULL TREND, so I expect it has been fairly easy to plan for the trend. What has been your practical experience.
More...

Several posts back is a summary of results both by credit spread and iron condor.

45 days is supposed to be the knee in the time decay curve. 30 days is too late. Some find 60 days too early. The trick is to properly estimate the probability of the underling trading instrument price touching your short option. This probability estimation takes into account days to expiration and volatility as well as the other usual suspects in options price calculations.

I've done rolls withing days of entering a spread. I've done them up to two weeks before expiring. From the summary you will see that several Iron Condors had 5 spreads withing them. So rolls add generously to the overall results.

In the five months where I have traded with real money, there has been one down month, one sideways month and three up months. I've not detected any difference in performance. The one area of concern I have is we have been in an unusually low volatility regime. The probability of touching model should account for that, but it remains unconfirmed with real money trading.
 
You need to understand that options and spreads are instruments. They are tools to achieve your goal.

An IC is not a strategy. It is a tool.

The IC tool allows you to play IV. The source of your positive expectancy comes from better forecasting IV than the market, not from the IC itself.
By simply selling or buying an IC you're entitled to nothing except zero expectancy minus costs.

Ninna
___________________________________

**** Well I sort of get the idea vaguely you mention above. But cannot think how to apply it, when putting on an Iron Condor.
How do you apply such knowledge? What are the meat and potatoes of this in application examples.
 
Well Howard and Ninna both have me spooked. I´m just a dumb country boy.

I really don´t get what Howard is actually doing I guess? Sounds very interesting, but what kind of decision tree he is working from I do not understand.

Ninna is talking about an IC is not a strategy but a tool, has me flummoxed also. What is the difference in your mind, pray tell. ( grin ) An enquiring mind would like to understand.
 
ninna is saying that option trading isn't about the specific strategies you utilize, but rather a function of a few underlying factors. One such factor is IV or, rather, the difference between implied and realized vol.
 
Quote from falconview:

Well Howard and Ninna both have me spooked. I�m just a dumb country boy.

I really don�t get what Howard is actually doing I guess? Sounds very interesting, but what kind of decision tree he is working from I do not understand.

Ninna is talking about an IC is not a strategy but a tool, has me flummoxed also. What is the difference in your mind, pray tell. ( grin ) An enquiring mind would like to understand.
More...
I'm glad you are cautions. There are risks that must be clearly understood before attempting this strategy. Some are uncertain I properly understand the risks myself.:) We'll see.

My plan is to begin posting the elements of the decision tree this weekend. One of my readers in another forum did it in a flowchart. I'll try to locate it.
 
Martinghoul

What a name? ( grin )

Yup! Just a sec, got to take that piece of grass out from between my teeth.

Since the Iron Condor is opposing spreads, I cannot see that figuring the volatility has anything to do with it? The whole idea being to let the index gyrate around between them. It is only when the index moves in one direction you get in trouble.
 
Martinghoul

Well I´m familiar with legging into a credit spread, or one side of an IC before you complete it. In that case, I have through habit got into the position of waiting for the index to move toward my target spread area, to take advantage of the premium ballooning, or volatility as you will when entering. However, if one is to take it at face value, that an IC is put on in one stroke, then probably one side would enjoy volatility and the opposing side would be deflating in premium. Therefore there would be no gain? May be I´m reaching here? ( grin )
 
Status
Not open for further replies.
Back
Top