Atticus
I love that stuff on gambling systems. Great thread. Having got curious and studied them and tried them many many years ago.
My other thread about trying to rationalize the IC system, finally became clearer in my mind. I can´t put it in your technical jargon, but essentially, I was wrong. It was a ROSY picture I painted trying to figure it out as I typed. It is much worse.
The Iron Condor is cheaper to put on, because only one side will be covered by margin. However, what in hindsight and some second thoughts I thought of, was that if a sudden market move occurs, you lose one spread, presumable all of it. Or 100% margin and three commissions for the two spreads. One winning spread will go to expiration presumably.
In essence, no matter what happens, you are going to lose 100% of margin. Plus three commissions. You cannot make that back, trading monthly, or two monthlies is my conclusion.
The problem is; with COMPOUNDING, or some call it pyramiding. To make credit spreads, and Iron Condors profitable, all the time, you need to pyramid, or compound to earn any decent return. Therein lies the fault with the system. If you compound, or pyramid, when you do get hit, you are going to lose everything you have made previously, because your bet size kept getting bigger.
You can add to that with the 20% POT early close. If a nose dive occurs in the market you are not going to get out fast enough. In a slow market you probably could, but unlikely. Somebody mentioned EXPONENTIAL. The speed of a drop, or move is going to blow up the premiums, to a gargantuan size and this will occur near to, or before 20% of POT. After that, you are probably going to lose 90% of your margin anyway. At least that was my experience last year TWICE.
As you say, you can make credit spreads work. By judiciously using them in a BULL market trend, or in a BEAR MARKET trend, only doing the appropriate credit spread according to direction. However, as such a strategy using 100% to make 2% after paying off the commissions, that is hardly a strategy worth trading. Especially if you are not pyramiding, or compounding. Might as well junk the system and go to something more rewarding. A system where you can control your losses better and compounding is not such a side effect.
Good discussion and I guess I have solidified my own thinking through it and will stay out of credit spreads forever, or Iron Condors. Just not worth it. There are easier ways to make a buck.
While volume is one key in trading movement. I like more to describe it as pressure in my own indicator of same. I no longer look at volume.
What I use is something a little easier and more practical that tells. It is called a clear simple protracter from a school kids geometry set. Anytime you get price movement at around 65 degrees or 70 degrees you have a blowoff and I suppose behind that is volume, when placing the protractor over the price chart? No need to guess if the volume is enough, the protractor angle will tell you, or at least it does for me.
I love that stuff on gambling systems. Great thread. Having got curious and studied them and tried them many many years ago.
My other thread about trying to rationalize the IC system, finally became clearer in my mind. I can´t put it in your technical jargon, but essentially, I was wrong. It was a ROSY picture I painted trying to figure it out as I typed. It is much worse.
The Iron Condor is cheaper to put on, because only one side will be covered by margin. However, what in hindsight and some second thoughts I thought of, was that if a sudden market move occurs, you lose one spread, presumable all of it. Or 100% margin and three commissions for the two spreads. One winning spread will go to expiration presumably.
In essence, no matter what happens, you are going to lose 100% of margin. Plus three commissions. You cannot make that back, trading monthly, or two monthlies is my conclusion.
The problem is; with COMPOUNDING, or some call it pyramiding. To make credit spreads, and Iron Condors profitable, all the time, you need to pyramid, or compound to earn any decent return. Therein lies the fault with the system. If you compound, or pyramid, when you do get hit, you are going to lose everything you have made previously, because your bet size kept getting bigger.
You can add to that with the 20% POT early close. If a nose dive occurs in the market you are not going to get out fast enough. In a slow market you probably could, but unlikely. Somebody mentioned EXPONENTIAL. The speed of a drop, or move is going to blow up the premiums, to a gargantuan size and this will occur near to, or before 20% of POT. After that, you are probably going to lose 90% of your margin anyway. At least that was my experience last year TWICE.
As you say, you can make credit spreads work. By judiciously using them in a BULL market trend, or in a BEAR MARKET trend, only doing the appropriate credit spread according to direction. However, as such a strategy using 100% to make 2% after paying off the commissions, that is hardly a strategy worth trading. Especially if you are not pyramiding, or compounding. Might as well junk the system and go to something more rewarding. A system where you can control your losses better and compounding is not such a side effect.
Good discussion and I guess I have solidified my own thinking through it and will stay out of credit spreads forever, or Iron Condors. Just not worth it. There are easier ways to make a buck.
While volume is one key in trading movement. I like more to describe it as pressure in my own indicator of same. I no longer look at volume.
What I use is something a little easier and more practical that tells. It is called a clear simple protracter from a school kids geometry set. Anytime you get price movement at around 65 degrees or 70 degrees you have a blowoff and I suppose behind that is volume, when placing the protractor over the price chart? No need to guess if the volume is enough, the protractor angle will tell you, or at least it does for me.