HowardCohodas Index Options Credit Spread Trading Journal

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The bottom line is, if you're (net) short volatility, your distribution will always be skewed. There's nothing you can do to change that fact. Your maximum gains are limited by your initial position, but your maximum losses aren't.

So, draw-downs are just a part of life for this strategy. (Similarly, if you're net long volatility... you'll have spectacular up days, once in a while.)

I actually have an IB account specifically ONLY for discretionary long option hedging. I set this up initially because I wanted to: a) get to the account via mobile, b) get lower commissions for these specific trades. And it's very interesting to see how the net value of this account decline, decline... before surging every time something "crazy" happens.
 
Quote from Maverick74:

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.
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I like this, but the commissions...

What structure do you like best for a bullish play, with volatility usually declining instead of increasing?.
 
Quote from eudaemon:

I like this, but the commissions...

What structure do you like best for a bullish play, with volatility usually declining instead of increasing?.
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Call calendars.
 
Quote from DionysusToast:


"I should have lost less. I did not build my cash reserves up fast enough (as I was in the process of doing) so that my circuit breaker could not fire properly. I had to unwind other spreads to generate the cash. This let one of the spreads speed past my trigger point. That hurt. Lesson learned. "
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Looks like howard got hit with margin per his own admission. This thread is a good real example how "safe" otm spread writing fails when a blackswan hit.

I dont think anyone should be happy another trader lost money but you do have the admit the timing in this case - just a few weeks back all the veterans were telling him how dangerous this is to no effect, then weeks later we hit the blackswan from tokyo and the result is there for anyone to see.

The thing is if you look at the US indices, the vol/panic wasnt anywhere close to the lehman days, it would be a much bigger loss for him if we repeated that. And i am not sure which broker he used, but if it was IB auto liquidation would kicked in at middle of the night when the nikkei was down 14% and es mini 30+ pts.

This is the first experience for howard i imagine of a mini blackswan, hopefully he will go back and reread some of the posts by atticus and others.
 
This advanced technique, along with its cousins, is popularly known in Chicago as the "eat like a bird, shit like a whale" technique.

Almost everybody is tempted by these high % win ratios at some point of their careers.

Howard would get high marks in my book, if he posted his aftermath results, and the difficulties he experienced while getting out under fire.

Everyone has to face losses at one point or another, when and how, and how good one is at dealing with this and open risk are what determine who makes it as a proffessional.

One more thing: AustinP of coiledmarkets is a long term crafty crook.
 
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