HowardCohodas Index Options Credit Spread Trading Journal

[HowardCohodas]

Quote from stevegee58:

In a calendar spread, the long and short strikes are the same and the expiries are different.

Buying the next month out put in my example doesn't make a calendar necessarily. You select the strike of the hedge put based purely on its current delta; who knows where the strike would be.

I personally wouldn't overcomplicate things by adding more spreads. A simple long option will do what's needed.

That is the basis of the insurance plan I am working on.

 

[HowardCohodas]

Quote from Maverick74:

No, you really don't. Sure you can always add new trades. So can a stock trader. Say I'm long apple and it's going against me, so what do I do, I short some NQ futures. Maybe I short some AMZN. Look, we can make this as complicated as you want. Both stock, option and future traders can add all sorts of trades to "hedge" out their risk. And that's perfectly fine if you can defend taking all those trades on their own merit.

But if you are an iron condor trader you just have to admit to yourself that you probably can't trade your way out of a paper bag (that is why one focuses on them) and when shit goes against you, just take it off. If you are claiming you have some special skill to manipulate your trades and hedge the underlying, then you are probably better off just trading the underlying.

We'll see.

 

[HowardCohodas]

Quote from Rodney King:

He's probably thinking, "why don't these clowns start their own threads and propose their own trades, rather than flaming me?"

Most of the criticism is done with class. One of the primary purposes for publishing my journal is quite selfish. It forces me to think deeply about things I may have glossed over during the development of my strategy. It exposes me to market regimes that I have not yet encountered. This has caused me to modify my management rules to better cover very unlikely but highly damaging market events.

As long as I am learning, I'll endure some of the very classless posts. Sometimes with humor, sometimes not so much. :eek:

 

[HowardCohodas]

Quote from newguy05:

Take it easy on howard guys, criticize his trade plans but leave the treadmill out of it. I mean it's GENIUS putting a $20 plastic on top of a treadmill and sell it for $500, i bet you all wish you thought of it.



you cant just say that, it really depends on the situation. Also selling naked vs spread, spread is safer unless you talking about cash covered.

You have spot traders using option as leverage/hedge, you have option amateurs using memorized combos trying to plug them in like some sort of jigglesaw puzzle, then you have the pros who trade the vol/skew and greeks.

My credit spread trading mentor told me that he did not mind if I traded options naked, but I was forbidden to trade naked options.

 

[HowardCohodas]

I think I answered everyone's questions. If I missed any, let me know.

 

[daveyc]

Quote from HowardCohodas:

That is the basis of the insurance plan I am working on.

Howard,

You may also want to consider 'broken winged butterflies'. Or, you can embed a bwb on your current position.

Just to confirm, buying the next month 'put' does create a calendar if using the exact same strike as the short front month option. But if you using a different strike it has a similar effect to a lesser or greater degree.

Howard, you're up early! I'm still on Asia time

Dave

 

[HowardCohodas]

Quote from daveyc:

Howard,

You may also want to consider 'broken winged butterflies'. Or, you can embed a bwb on your current position.

Just to confirm, buying the next month 'put' does create a calendar if using the exact same strike as the short front month option. But if you using a different strike it has a similar effect to a lesser or greater degree.

Howard, you're up early! I'm still on Asia time

Dave

I operate asynchronously with the sun unless I have a meeting or am actively trading. I sleep when tired. I'm "instant on" when I wake. 2-4 sleep session usually total 7-8 hours in a 24-hour period. Besides, sleep is just an annoying interruption to doing fun stuff.

 

[atticus]

Quote from HowardCohodas:

My trading unit is a credit spread. I treat an Iron Condor as an artifact with the benefits of adding the companion spread with no additional capital requirement and somewhat neutralizing delta.

I experimented with using the Greeks as a spread management tool, however I found it added no value to the outcomes over what I do, it is more complicated to understand and it can be more complicated to execute.

My adjustments plan is driven by the Credit Spread Management Dashboard. It divides credit spread management into two areas of adjustments to consider; opportunities and jeopardies. Opportunities include:

• Adding a credit spread to a spread that does not yet have a companion to form an Iron Condor
• Rolling a spread that has already achieved 80%+ of its potential.

Jeopardies include:

• Excessive Probability of Touching
• Days to expiration
• At risk P/L

I do not use weeklies as a hedge. I use them as opportunities to repeat profits more frequently. My results so far is that, with respect to the way I trade credit spreads, they act much the same as monthlies in their last week before expiration. In both cases, spreads in this time of their life require more intense monitoring as they can go south quickly. In some cases I have even been able to add a roll to increase profits even more, or to mitigate a loss. I still trade weeklies in small money mode. However repeating this frequently, weeklies still makes a noticeable contribution to my monthly performance.

I do not at the moment, but I am always interested in new methods to improve management to either add profits or mitigate risks.

That said, it seem that Theta quickly dominates Vega as expiration nears. After all, credit spreads are built to take advantage of time decay.

Not much has been stated about how you "mitigate" a loss. You've mentioned rolling a position that has earned 80% of the credit, but no specifics about marked-losses.

Will you add an opposing short vertical to one that is losing? For example, you're losing on a put spread so you add a call spread.

How is adding duration (rolling) helpful in mitigating a loss?

What do you do if the underlying gaps to your short strike or beyond?

 

[HowardCohodas]

Quote from atticus:

Not much has been stated about how you "mitigate" a loss. You've mentioned rolling a position that has earned 80% of the credit, but no specifics about marked-losses.

Will you add an opposing short vertical to one that is losing? For example, you're losing on a put spread so you add a call spread.

How is adding duration (rolling) helpful in mitigating a loss?

What do you do if the underlying gaps to your short strike or beyond?

You have zero credibility with me as a consequence of the content of your posts and your attitude. Should someone with credibility ask specific questions, I will gladly answer them.

 

[atticus]

Quote from HowardCohodas:

I hate to repeat myself, but in your case I'll make an exception.

Do some reading. I wont do your homework for you. If you disagree with any of my innovations, let's discuss.