Your qualifications to make that judgment are what?
It would not offend me if you said "I believe ..."
HowardCohodas Index Options Credit Spread Trading Journal
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It would not offend me if you said "I believe ..."
Okay Howard 
You are up early this morning??? It´s 5. 10 a.m. here.
Don´t let the critics get to you. Just follow the music coming from your own drum.
You are up early this morning??? It´s 5. 10 a.m. here.
Don´t let the critics get to you. Just follow the music coming from your own drum.
hey howard, serious question and i apologize if answered by you already...can you honestly tell me if the money you have in the system a significant portion of your liquid cash or net worth?
and regarding owning the stock vs credit spreads; most guys use far more leverage doing spreads than simple spot, hence the blowouts when 100% of the time you get that move the others speak of. again, "most" guys get wacked before stops/adjustments can be implemented. no one listens, credit spreaders just become critics of the trade ultimately.
and regarding owning the stock vs credit spreads; most guys use far more leverage doing spreads than simple spot, hence the blowouts when 100% of the time you get that move the others speak of. again, "most" guys get wacked before stops/adjustments can be implemented. no one listens, credit spreaders just become critics of the trade ultimately.
Atticus came up with a good thing the other day. He was talking about using only 10% of available capital. I had been using more, in order to compound, relying on good move setups, as the EDGE. My recent move over 13 weeks of 137% ROI was based on compounding. However, I was experimenting in a throwaway experimental monopoly funny money account elsewhere doing something else, and did just that ( made a mistake ) and had to take a good loss, about 25% of capital. Which made me rethink somewhat.
I like confirmed winning setups though and like to risk a whole lot more to compound on them. The trick is knowing them inside out, upside down and sideways. So if you go SOUTH, you get out quick.
Still ATTICUS comment has made me sit back and re-think position size according to capital availability. Useful lesson and glad it wasn´t in a real money account.
I like confirmed winning setups though and like to risk a whole lot more to compound on them. The trick is knowing them inside out, upside down and sideways. So if you go SOUTH, you get out quick.
Still ATTICUS comment has made me sit back and re-think position size according to capital availability. Useful lesson and glad it wasn´t in a real money account.
How well would your bull put spreads do if we had a flash crash like last May but the market *didn't* pop right back up? I was of course simplifying when I gave the toy example of a series of credit spreads that expire worthless followed by one that goes in the money so fast you can't stop out and wind up with the full, worst case loss. But what is more realistic is a drop so fast that you stop out with a 40% loss of capital. Remember that you're trying to buy back those spreads when the market is panicking, half the market makers have put up "Gone fishing" signs, and bid/ask spreads are a mile wide.
It is the nature of selling far OTM credit spreads that you have lots of little wins with occasional big losses, and that makes it very hard to do adequate statistics to determine if you really have an edge.
I use Kelly, but if you can't define your edge then your best to apply some delimited capital rules; say risking 4:1 on 25% max allocation on that portion of the portfolio.
It's nuts to calculate ROI on the spread requirement. Earning $500 on a $4,500 requirement is not an 11% on portfolio, as few would be careless enough to trade it to the limits of their account.
Sorry for the misconception. I´m out of spreads and just plain buying and selling options. Based on time honored, well known setups all over the internet and in literature for 40 years.
I only committed 20% of my investment pot to this strategy. I can afford to lose it and not materially affect my life style. Most of the pain would be to my ego. It's been reported here as outrageously large.
A trading system is made up of two key components; the strategy and the trader. A good strategy. when traded by a careless and undisciplined person will still lose money. That is why I recommend anyone trying a new strategy, even mine, should first paper trade it. Then, using only money they can afford to lose, trade with small money. Only then should they move to serious money. Always limiting this kind of strategy to money that can be lost without materially affecting life style.
A focused and disciplined trader does not look for blame. He monitors his results continuously so that he can analyze a trade to discern if he made an error, if it is a loss to be expected from the statistics of the trade or there has been a systemic change in the market rendering the strategy ineffective. I have developed a methodology aimed just at this element of trading.
Black swan events must be provided for. The strategy contains several mechanisms to deal with a sudden change in volatility as may occur by a precipitous drop in prices. Risk analysis I have performed indicates that such an event would be very painful, but not fatal. Expectations are that the account would recover in one to three months. Since I have not yet encountered such an event during real money trading it remains an analysis not a test. However paper trading and back testing results are within the ballpark of the analysis.
This analysis increases confidence, but cannot replace prudence or continuing to strive to find solutions for the risks that are not yet well covered.
Are you still paper trading or is any of this commentary dealing with money at risk?
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