What I´m getting from Howard is that he is closing spreads that win 80% or so. Or before the market reverses and he loses it again due to collapse of volatility or something like that.
The comment by Brook Rimes seems pertinent. The credit spread is about selling Time Decay. So why not go to monthlies instead of 60 day. Which is why I traded weeklies last year and lost my account twice in doing so and gave up. In weeklies you cannot rollover.
I tried this week and have an IC on right now. But when I check the premiums, I see while I sold for a premium of .60 cents, Iwill need a $1.00 to get it back. Which means I lose. Presuming TImE DECAY does it´s magic I presume down the road his average of 19 days for TIME DECAY to take effect and reduce that cost. I´m having trouble figuring out what he is doing? A rollover ( I´ve not done one yet ) is basically closing a spread. That way sees a loss. There may be some savings in a rollover, I believe it is supposed to be in commissions? Maybe somebody can enlighten me on that. But if you are going to close a spread in a rollover, then why not just close the darned spread and done with it and restart by legging into another credit spread at an advantegous point and time more to your choosing?
The question arises about TIME DECAY and rollovers. I see Howard is using rollovers, so he must be making a gain here somehow? The system I see it of Howard´s seems to be a take a profit on a credit spread when you have it in market gyrations. In weeklies trading I only went for expiration. So I´m not at all sure how the index has to move to give you a profit, or loss, other than TIME DECAY on any spread. Is it the index moves toward your spread, or moves away. I think from my previous losses which happened twice last year, the index has to move away from your spread to profit. Enlighten me on that somebody.
Howard seems to be simply selling premium as often as he can and closing any spread whether in an IC or not, so he can resell another month out or something.
I´m more concerned in big moves. In the weeklies last year it was common enough to have a move of 3% deviation in one day. Even 4% deviation sometimes. Trying this 60 day system, I see that you get further out in premium strikes than you can in a monthly. No problem to go 6% deviation out and sell premium. I would wonder how you handle something when you get a 11% deviation, or how would you handle it? The only reasonable idea I have seen by OPTION COACH was to stop selling BULL PUT spreads when the VIX rises above 20. Sticking with Bear Call Spreads above that. Other than that in a BULL TREND, the 60 day spread gives you more room at least in the OEX to get bigger premium and a few strikes further out, to 6% deviation. So there is that about it.
I´m enamoured of DELTA numbers, or POT too much. They can change in a flash if the market so decides and mean nothing at all. I prefer deviation %.
Right now I´m puzzling over how you figure you have a profit, when your buy back closing cost is so much higher than what you sell for. I´ve just made a sheet to follow my sold premium and buy back premium difference to see if I can figure it out over the next month watching and recording the changes.
