Momentum/day trading SPX - Ever try buying opposite direction in order to "freeze" your P/L?
- Thread starter stockspy456
- Start date
I had an idea many years ago when I first started trading options. I never tried it nor tested it:
Like you, I would notice that my previously owned options 'would have become' profitable had I held them, so I had this idea.
Enter a straddle. When one side becomes profitable, sell just that leg--then enter a new straddle. These are just OTM straddles.
Leave the losing options laying around. If the market hits them before they expire, sell them along with the current winning leg of the latest straddle; or let them rot.
My theory was that if they are rotting, then I'll be profiting due to the trend. If the market is range bound, then they'll eventually become profitable.
FWIW
Meanwhile, you replied to Handle's first post above (#3) with a reply which made me think "Did he actually read the post he's replying to, at all?"
Since you're new to trading, and accept expressly that your ideas are amateur, does it occur to you that maybe long posts explaining that what you're doing is a losing tactic because of the escalation of fees is exactly what you need?
You've kind of put the forum's more experienced members, many of whom have "been there, done that" in the past and may be able to help you, in a position in which they can't help you. Had that struck you, about the conversation?
There are a lot of really friendly, really experienced and potentially very helpful members here who may be able to offer advice, but when you react to a certain view (which is going to one you'll hear quite a bit, given what you've asked) by saying "trolls can exit", do you appreciate that that's about the same as saying "I want advice, but I only want to be told specific things that I want to hear, and anyone else is a 'troll' "? I'm just wondering whether you'd noticed that about the way you're asking for help, here?
No personal criticism intended at all, and apologies indeed if I come across to you as a "troll", but I hope you'll excuse my mentioning that you seem to be going about the process you've started, here, in a rather unorthodox way, and I can't help wondering, myself, whether it might actually even be rather a counterproductive way?
Just my perspective, of course, and by no means meant impolitely. I'm sure you're right, really.
If you are unable to trade futures, you can trade the SPY to hedge your position. Find out the delta of your position and buy or sell the corresponding shares of SPY. This is slightly different from a straddle. If say you were long calls, a straddle would be buying an equal delta put. This would hedge you delta (directional position) but you would have additional risk in the extra premium you just bought. You would also have given up edge in buying the put. Just shorting SPY stock against your long calls would be a much better hedge until you decide what to do with the position.
[QUOTE="You can't truly freeze your trade either.[/QUOTE]
Cbc is absolutely correct. Even if you hedge with SPY as I suggested, you will still have risk of premium decay/expansion, etc. But it will hedge your deltas, and if you are looking for a very short term "freeze" this will be your best option, as it will take out your delta risk.
Cbc is absolutely correct. Even if you hedge with SPY as I suggested, you will still have risk of premium decay/expansion, etc. But it will hedge your deltas, and if you are looking for a very short term "freeze" this will be your best option, as it will take out your delta risk.
Hi Xela, CBC, and Handle:
Apologies if I offended anyone by writing that I don't need long posts telling me that I need discipline. I am new to this forum, and have read other posts where OP asks a question, and the majority of comments are others joking around (trolling a user's lack of knowledge), and after 20 posts finally providing real suggestions. I had taken Handle's post that way. If you read Handle's post, the main suggestion that I was reading was that I need many more trades and many more knowledge before trading, such as "but you have much study before you knowing which month to use", and "But to be doing offsetting is adding fees cause you lack knowledge and impulsive screams you lack discipline and should not be trading at all. What is the rush to lose your money? It won't be long till you have no money left."
The message that I received by reading that was that I should just stop trading, and study. My initial reaction to that message was that I am not sure what Handle's objective is to writing a response to my post in the first place, as I do not see any actual helpful tips or experiences in Handle's message, therefore I took it as a user who may have been out to waste time telling me that I am better off giving up. If that was not the message that Handle was sending, then apologies for assuming that it was a negative post. I am open to suggestions on how I can hedge myself, how the experts and pro's hedge, and any other key things those members feel I would benefit from reading regarding hedging, and SPX option trading.
Regarding fees, if I make 10 trades a day my fees would be something like $150+, or even 20 trades a day would be $350+, just guessing. That is certainly only something I would be ok paying if I were making $1k a day, at a minimum. This is in fact possible in SPX, and yes it's possible to lose $1k a day as well, as I have had times where I was doing that in my very very initial stages, a few months ago.
Again, thank you for your help and suggestions, if you are so kind to give them.
Apologies if I offended anyone by writing that I don't need long posts telling me that I need discipline. I am new to this forum, and have read other posts where OP asks a question, and the majority of comments are others joking around (trolling a user's lack of knowledge), and after 20 posts finally providing real suggestions. I had taken Handle's post that way. If you read Handle's post, the main suggestion that I was reading was that I need many more trades and many more knowledge before trading, such as "but you have much study before you knowing which month to use", and "But to be doing offsetting is adding fees cause you lack knowledge and impulsive screams you lack discipline and should not be trading at all. What is the rush to lose your money? It won't be long till you have no money left."
The message that I received by reading that was that I should just stop trading, and study. My initial reaction to that message was that I am not sure what Handle's objective is to writing a response to my post in the first place, as I do not see any actual helpful tips or experiences in Handle's message, therefore I took it as a user who may have been out to waste time telling me that I am better off giving up. If that was not the message that Handle was sending, then apologies for assuming that it was a negative post. I am open to suggestions on how I can hedge myself, how the experts and pro's hedge, and any other key things those members feel I would benefit from reading regarding hedging, and SPX option trading.
Regarding fees, if I make 10 trades a day my fees would be something like $150+, or even 20 trades a day would be $350+, just guessing. That is certainly only something I would be ok paying if I were making $1k a day, at a minimum. This is in fact possible in SPX, and yes it's possible to lose $1k a day as well, as I have had times where I was doing that in my very very initial stages, a few months ago.
Again, thank you for your help and suggestions, if you are so kind to give them.
Right, it wouldn't freeze it, that's something I get. But it would be quite close to freezing, as I would have equal amount in both directions. It would at least allow me to "mostly freeze" myself, while I take some more time to finally decide what I see in the market, where it's headed, ultimately leading to my decision as to which direction to abandon. If I see that the trend is still headed up, having just recently purchased put's in order to hedge myself (or "freeze"), then I will then abandon those puts and hopefully see my calls increase if I am correct in my prediction.
For me, this is a much more workable approach, versus deciding to drop my calls when I "think" the trend is reversing, buying puts, and then changing my mind 2 minutes later and wishing that I still had those calls. Having both sides during that small amount of time when I am determining if the direction is truly changing or not I feel would work better for me, because then I can choose which to abandon, and selling a call or a put in my opinion is just much easier than buying a call or a put. Maybe it's psychological, but I am much more relaxed and thinking more clearly when I have to decide what to get rid of, versus what to buy.
As for the premium decay (theta?), yep, I don't plan on holding positions overnight, so I wouldn't have to worry about that. Perhaps someday when I am more experienced, I will go ahead and enter positions that are looking 1+ month out.
Thanks for your tips. I really appreciate it.
No, I mean shorting shares in the SPY etf. You will either buy or sell short SPY shares in a delta equal to your SPX position.