AMMO
You said a mouthful there. I certainly agree that legging in, with a directional play is the way to go. The idea there are 3 trends a month was a good one, though I only play the idea of that in straight option buying, on the assumption there will be only, one or two. There probably could be in high VIX environment as many as four I suppose.
I did not understand your Rule of Thumb last sentence though. Maybe you could explain that one?
From my limited one year experience I kind of think, unless there is someway to actually use the rollover as a recovery from a threatened closed spread loss, I´ll skip credit spreads. That is the whole point I am watching Howard do his thing. The losses are just too huge to recover from is my experience.
Assuming a $5000 account, a $1000 trade, a 3% credit. That is 20% of your capital at risk for a $30 return, not counting commission costs. Even if you closed a trade early, at the 20% loss point, you would be down $200. Which means you would need in that same month, a recovery of 7 rollovers each earning 3% to recover from a single loss by closing early. Assuming you were able to do that in Iron Condors, you would reduce your number of rollover trades to 4, maybe 3 to cover the cost of the loss of one losing early threatened trade. The odds are against you doing this successfully. Particularly in one 60 day period. Just my guessing here from my limited experience using weekly credit spreads and iron condors for 8 months, in which I lost my $25,000 of funny money wad twice before giving up.
You said a mouthful there. I certainly agree that legging in, with a directional play is the way to go. The idea there are 3 trends a month was a good one, though I only play the idea of that in straight option buying, on the assumption there will be only, one or two. There probably could be in high VIX environment as many as four I suppose.
I did not understand your Rule of Thumb last sentence though. Maybe you could explain that one?
From my limited one year experience I kind of think, unless there is someway to actually use the rollover as a recovery from a threatened closed spread loss, I´ll skip credit spreads. That is the whole point I am watching Howard do his thing. The losses are just too huge to recover from is my experience.
Assuming a $5000 account, a $1000 trade, a 3% credit. That is 20% of your capital at risk for a $30 return, not counting commission costs. Even if you closed a trade early, at the 20% loss point, you would be down $200. Which means you would need in that same month, a recovery of 7 rollovers each earning 3% to recover from a single loss by closing early. Assuming you were able to do that in Iron Condors, you would reduce your number of rollover trades to 4, maybe 3 to cover the cost of the loss of one losing early threatened trade. The odds are against you doing this successfully. Particularly in one 60 day period. Just my guessing here from my limited experience using weekly credit spreads and iron condors for 8 months, in which I lost my $25,000 of funny money wad twice before giving up.
