HowardCohodas Index Options Credit Spread Trading Journal
- Thread starter HowardCohodas
- Start date
- Status
Real money trading is the only true test of a strategy and I have only been doing this with real money since Aug 0f 2010. Part of my due diligence process was to back test using 2005 through 2009 data. I also paper traded for 5 months before beginning my preproduction step (small money trading) in the qualification process. Only then did I begin production trading (serious money).
My testing results indicate (remember real money trading is the only true test) that the strategy would be successful in both high volatility regimes as well as low volatility regimes. Until the last few days, the real money trading has been in low volatility. The real danger is in the transition in volatility after the spread is entered.
I have published my black swan event analysis of my strategy. The analysis indicates that it will be painful, but not debilitating.
If you want to be treated seriously, try a different approach. Without fact to back up your premise, you are not worth my time.
Please be aware that nothing you did in your previous career has any relevance to this disucssion. Some of the best long-term futures traders from Market Wizards original book came out of high school. As Maverick has stated, this strategy has been anally probed and dissected many times and it all just comes down to risk management as there is no secret to it. I made good money on it when VIX traded between 10-18 and moved on when it spiked to the 30-50 range. The strategy of course works as long as the market behaves. When the market does not behave, well find me a credit spread seller who is long-term...
People with high level degrees in economics and mathematics are professors who do not trade at all. Black-Scholes was created by professors who were brilliant but when they started trading for real, they had one of the greatest blow-ups in hedge fund history (LTCM).
So getting patent related to GPS is nice for your prior working career but realize it is not a transferable skill into trading options. All we are doing it opening your eyes to the risk because you seem to be sugar-coating it and the fact you are teaching it to others means at some point you are going to make a lot of people unhappy.
If you are arguing that you are not risking something like $45 to make $5, which every option expert will state is the risk/reward basics of OTM credit spreads, then right there you are missing a key piece of information.
Any credit spread seller worth their salt will have no problem admitting this is a lousy risk/reward trade. Does not mean you cannot make money with it using it correctly, but I am seeing signs here I have noticed in countless other IC=easy money people that confuses recent success with option intelligence.
In college I once sunk a half-court shot in basketball on a bet while slightly inebriated. That must mean I am an awesome option trader! You know that it doesn't so.... you get the point.
Just curious about something here. Many of us on these forums have been trading "real" money for 10 to 20 years and even longer. You admittedly have been trading this strategy for less then 2 years and you are "coaching" people on it? Do you really think that is ethical? Do you really believe you are an "expert" on credit spreads? Maybe you should get 5 to 10 years under your belt before you try to make your coaching a commercial endeavor.
Sell a 25-point wide credit for $1.50.
The reward is $1.50
The max risk is $23.50.
The risk is many times greater than the reward.
If this fact is not clear enough and you still want to argue it then please reconsider trading. This is simple risk/reward analysis that any beginner option trader should have mastered.
i do believe you have not computed properly what vol will do to the spreads when combined with short strike breaches. if you did this properly you would have different conclusions.
anyway, good luck...but with your limited experience selling your untested strat to others is downright unethical.
One clear point to be made, I am not telling you to NOT trade these. I traded these myself.
What raised everyone's "interest" is that after a year or so and a career that had nothing to do with trading or options, you are now coaching and teaching this strategy based on some false assumptions and then will eventually charge for this gift.
You have to realize that you are inexperienced in option trading compared to the numerous people out there who do offer coaching and mentoring services (to see what I mean look up Charles Cottle).
SO when you paint the strategy as low risk and "easy" when those of us know that nothing is easy in option trading no matter how pretty the probability of touch numbers paint it, and then will be a self-proclaimed teacher, coach, mentor, then we feel a little protective of the beginners you will pass on this misinformation to.
What raised everyone's "interest" is that after a year or so and a career that had nothing to do with trading or options, you are now coaching and teaching this strategy based on some false assumptions and then will eventually charge for this gift.
You have to realize that you are inexperienced in option trading compared to the numerous people out there who do offer coaching and mentoring services (to see what I mean look up Charles Cottle).
SO when you paint the strategy as low risk and "easy" when those of us know that nothing is easy in option trading no matter how pretty the probability of touch numbers paint it, and then will be a self-proclaimed teacher, coach, mentor, then we feel a little protective of the beginners you will pass on this misinformation to.
- Status