Just keeping me on my toes?
HowardCohodas Index Options Credit Spread Trading Journal
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Not sure I would say "great" risk/reward but good luck, we do seem to be heading lower overall.
Ya your right i was thinking if it was an iron condor with the puts it would have been a great risk reward. Either way i closed them out @ .95. Taking profit when i can.
I would like to hear other stratagies others use during times of higher volitality. I do think we are heading into a time of more turbulence.
Good luck all.
I would like to hear other stratagies others use during times of higher volitality. I do think we are heading into a time of more turbulence.
Good luck all.
What specific fly or other structure would you rather have put on instead?
I do not follow the RUT really but with the bearish bias of the poster, the bear call spread was his choice and it worked out well given the sell off today. RUT down 17 points so that premium must have been cut in half.
Good trade. With increased volatility all it really means right off is that I would be wary of simply going long calls or puts outright since higher vols can become lower. Using OTM put calendars, bear put spreads, riskier slightly OTM short straddles, or even put ratio backspreads for larger expected moves are all unqiue ways to be bearish taking volatility into account.
Selling call spreads are terrible ways to play the short side of the market. If you are going to sell the OTM call spread in the RUT, buy the same debit amount for an OTM put spread. Your risk is basically the same, but instead of making 1.65 you can make 10 pts. Risk to reward is much better. So your net debit is zero, your risk is almost the same amount as selling the call spread alone and your upside is 5 times greater.
Probably goes w/o saying that you won't get as much bang-for-the-buck on the spread you buy, because of the skew/smile.
Come again? You are long a downside put spread at no cost. There's plenty of bang for the buck (10 pts). It's a no brainer. It will absolutely outperform the short call spread 100 times out of a 100.
Quote from atticus:
How about if we creep up to 855 at exp?
Sure, but I'm talking about if we get a selloff in the market. Both spreads are going to blow out on a move to the long call strike. I just never understood the idea of trying to capture a 1.65 credit in the RUT when the index can selloff 50 pts in a month.
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