All very interesting to this amateur. Some of it is over my head.
What are scalping outrights? Kindly explain this jargon for me!
What are scalping outrights? Kindly explain this jargon for me!
HowardCohodas Index Options Credit Spread Trading Journal
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in other words, rather than writing crappy options on the index, trade the index with very short term trades, a few ticks for targets and stops, almost always with the spread in your favour for at least one of entry and exit
then go home at the end of the day flat
then go home at the end of the day flat
Ahhha ! Thankyou. That is exactly what I am doing. More or less?
Though I am learning to read the spread a bit, but haven´t figured it out yet. The wider spreads are taking the meat out of the bun I noticed this last latter week and I earned nothing, but broke even and paid commissions.
So what to do with those situations which are tradeable theoretically by chart reading, but the spread has already taken all the profit out of it, is something I am puzzling over right now.
Very good comment though Arabian Nights. You got any other wisdoms there, would appreciate your experience.
Though I am learning to read the spread a bit, but haven´t figured it out yet. The wider spreads are taking the meat out of the bun I noticed this last latter week and I earned nothing, but broke even and paid commissions.
So what to do with those situations which are tradeable theoretically by chart reading, but the spread has already taken all the profit out of it, is something I am puzzling over right now.
Very good comment though Arabian Nights. You got any other wisdoms there, would appreciate your experience.
Another advanced technique, very popular amongst the high % win crowd, is the "I'm going to the bar" technique, or the "i'm on the road this week" technique, or the "switch off the monitor and adopt the fetal position" technique. All the while the account is getting decimated.
These "ostrich strategy" techniques work a large % of the time, except when they don't and the damage is total. Actually the "kill the ostrich" technique is basically like shooting a bird in a cage and almost always gives "the market" the last wave of liquidation. By tuesday the ostridges were in trouble, with the final puke late wed and thu early session.
Maybe some stubborn ostridges survived or broke even by friday, this time, but most were liquidated by their margin departments. Having friends that talk too much working in margin departments is useful sometimes, if you can get them drunk.
These "ostrich strategy" techniques work a large % of the time, except when they don't and the damage is total. Actually the "kill the ostrich" technique is basically like shooting a bird in a cage and almost always gives "the market" the last wave of liquidation. By tuesday the ostridges were in trouble, with the final puke late wed and thu early session.
Maybe some stubborn ostridges survived or broke even by friday, this time, but most were liquidated by their margin departments. Having friends that talk too much working in margin departments is useful sometimes, if you can get them drunk.
Some skilled people can read the tape and/or the reaction to the news, or the open interest of the options near expiry to take a shot, but they all use tight risk management in case "the read" is wrong. Bottomline they lose small or win big, which is the opposite of the premium selling crowd.
Get long the index. LOL. I guess it depends on your conviction level. Lots of ways to play that. Vol is really pumped still even though it came in hard the last few days. If you are really confident that we are going to re-test the highs at 1343 then vol will certainly challenge the 16 to 18 area again. You could sell a DITM put on the index to capture the long delta and the vol bleed.
If you think vol will stay bid, you could buy long index calls and sell put spreads on the VIX or VXX.
You could spread the Russell 2k against the S&P. The Russell tends to outperform on the upside and it's held up much better on this sell off.
The OTM call calendars are good because you get the deltas and some protection from the vol implosion likely to happen. You'll want to keep rolling them up if you think we are going to get a substantial move.
And then you've got the old OTM fly. The flys are better priced on the downside due to the put skew but it's still a cheap bet with a nice payoff. The problem with the fly is the p&l is not symmetrical. So you have to have a target in mind.
I would not go long delta calendars if you think we approach the highs. Just as it rarely makes sense to buy downside flies if you expect a decline. You can do it in individual stocks, but index will not be very forgiving. The upside calendars will lose more to delta than is gained by the rise in vol (if we drop on price). They lose a bit to skew as well.
Buy the risk-reversal if you want a lot of deltas with some short vol-exposure.
JMHO.
Buy the risk-reversal if you want a lot of deltas with some short vol-exposure.
JMHO.
Well, that is why I suggested he keep rolling them. I would not suggest buying the 1340 calendar. Just buy them in 20 strike chunks. Unless he thinks we are going to trade straight up to 1340 which is highly unlikely. More likely it would be a slow back and forth grind.
I only suggested the calendars if he was worried about downside risk or event risk. Honestly he is better off just selling the DITM put. He gets the same upside as the risk reversal plus he is short vol. I'm not sure what he was implying by a gap and go. If he just wanted to play a one day pop or if he is trying to play a larger move to the upside. That really makes a big difference.
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