Momentum/day trading SPX - Ever try buying opposite direction in order to "freeze" your P/L?

[eganon69]

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.

Hi,

I appreciate you are new to trading and the forum. What the other posts above are trying to tell you is that YES You should stop trading. You are just guessing what will happen and have no laid out plan to go about trading. What Handle123 and Xela are trying to say is that you ask a question and you don't like the answer so you think they are being negative. In fact, MANY of us would have appreciated this kind of advice before we lost TENS OF THOUSANDS of dollars in tuition to the market as we learned these things. (I speak from experience here). You don't like hearing that and want someone to tell you something other than you need to study and practice ON PAPER or TD Ameritrade or whatever but stop wasting your own money in the process.

Why don't you back test any and every strategy you come up with on TD? Why don't you look at the charts and see why you exited the position in the first place? If you are a trend follower (I think you mentioned that above) then what makes you think that just because you decided to exit the position that the trend or trade was over? Did you not think it could just consolidate for a while before continuing higher? How do you discern the difference?

You also say that you would have been more profitable by buying the straddle you are describing but what I would suggest is that you would have been more profitable not entering ANY new position when you decided to exit too because no money would have been lost on a losing end of the trade.

Everyone thinks ENTRIES are where the money is made. Actually it's the EXITS in my opinion. Knowing when to cut losses early (Exiting a losing position) saves capital, and when to let winners ride (exiting only when there seems to be no more profit to protect) is how you maximize your gains. You seem to be failing at letting winners ride by exiting too early. Why compound that problem by entering in a counter direction just because you exited? The point everyone is making is that these issues should be resolved before you decide to trade again and test these by looking at charts hours upon hours and studying.

You are playing in the big leagues with people that do this for a living and you think with just some basic knowledge and trial and error in a few months you can be successful. Highly doubtful that will occur. Most people put in 3-10 years before getting to that point. Some never become successful. It's like saying I want to perform a heart transplant but I just learned Anatomy and graduated medical school a few months ago. What would you say to that person? You would say,....go learn and gain a lot more knowledge for ALOT LONGER SON,....maybe you will develop the skills? We all hope you do. But why "operate" and lose money until you know more of what you are doing?

But until then no sense in getting mowed over with real money. Read and study charts and learn about EXITS to protect profits on winners and to protect capital on losers.

Good luck

Just my 0.02

 

[FSU]

So if you buy 1 call in the SPX and it has a 50 delta (which it would if the call strike was about at the same price of the index) you would short 500 shares of SPY, which is also equal to 1 emini S&P 500 future. This would get you delta neutral.

The problem with this is the margin required for shorting the SPY is high (in a non PM account) vs the margin required for the future.

 

[stockspy456]

Hi,

I appreciate you are new to trading and the forum. What the other posts above are trying to tell you is that YES You should stop trading. You are just guessing what will happen and have no laid out plan to go about trading. What Handle123 and Xela are trying to say is that you ask a question and you don't like the answer so you think they are being negative. In fact, MANY of us would have appreciated this kind of advice before we lost TENS OF THOUSANDS of dollars in tuition to the market as we learned these things. (I speak from experience here). You don't like hearing that and want someone to tell you something other than you need to study and practice ON PAPER or TD Ameritrade or whatever but stop wasting your own money in the process.

Why don't you back test any and every strategy you come up with on TD? Why don't you look at the charts and see why you exited the position in the first place? If you are a trend follower (I think you mentioned that above) then what makes you think that just because you decided to exit the position that the trend or trade was over? Did you not think it could just consolidate for a while before continuing higher? How do you discern the difference?

You also say that you would have been more profitable by buying the straddle you are describing but what I would suggest is that you would have been more profitable not entering ANY new position when you decided to exit too because no money would have been lost on a losing end of the trade.

Everyone thinks ENTRIES are where the money is made. Actually it's the EXITS in my opinion. Knowing when to cut losses early (Exiting a losing position) saves capital, and when to let winners ride (exiting only when there seems to be no more profit to protect) is how you maximize your gains. You seem to be failing at letting winners ride by exiting too early. Why compound that problem by entering in a counter direction just because you exited? The point everyone is making is that these issues should be resolved before you decide to trade again and test these by looking at charts hours upon hours and studying.

You are playing in the big leagues with people that do this for a living and you think with just some basic knowledge and trial and error in a few months you can be successful. Highly doubtful that will occur. Most people put in 3-10 years before getting to that point. Some never become successful. It's like saying I want to perform a heart transplant but I just learned Anatomy and graduated medical school a few months ago. What would you say to that person? You would say,....go learn and gain a lot more knowledge for ALOT LONGER SON,....maybe you will develop the skills? We all hope you do. But why "operate" and lose money until you know more of what you are doing?

But until then no sense in getting mowed over with real money. Read and study charts and learn about EXITS to protect profits on winners and to protect capital on losers.

Good luck

Just my 0.02

Sheesh. So this post is becoming what I had originally stated that I see a lot on here, where others who are "very experienced" have to write out long power replies.

I actually didn't write out everything I know, everything I have done, etc., because I didn't want to. I have spent countless time with charts, studies, which studies work best, backtesting etc., and I am still new. I will never not be new.

I was just saying that I didn't realize that Handle was out to help me, and not troll. I am done responding to any other emotional responses on this...

 

[stockspy456]

So if you buy 1 call in the SPX and it has a 50 delta (which it would if the call strike was about at the same price of the index) you would short 500 shares of SPY, which is also equal to 1 emini S&P 500 future. This would get you delta neutral.

The problem with this is the margin required for shorting the SPY is high (in a non PM account) vs the margin required for the future.

Ah right, because SPY can actually be traded, while SPX is only traded with options. Yeah, shorting limits quite a lot more than buying, which is one thing that's so great about option trading, in that you can buy both directions, while one direction is betting on the underlying going down in value (put), and one direction is betting on the direction increasing in value (call).

Awesome, thanks for the help.

 

[lawrence-lugar]

Maybe this is just a strategy that is better for me, to control my own impulses, as I feel closing out a position is much "easier" than trying to enter/open a new position.

Has anyone ever tried doing this?

Try it -- and develop your own style and conclusions

Alot of people ask opinions of random traders on forums...as far as I'm concerned, everyone out there are failed trades...so take their advice with a grain of salt.

 

[stockspy456]

Strategy worked decent today. My put went from $13 to $16 this morning. I bought calls when the put was lingering around $16, and when spx looked like it may have hit its range/predicted move. I then eventually got rid of the puts, while the calls were already in my portfolio and increasing. I was sitting at around $1800 profit at that point, and my P/L was nearly break even between the puts and the calls.

I was sitting good with a nice $1800. The second half of the day turned into more of a surprise, as most of the chart studies I follow were switching constantly back and fourth (more often than I'm used to seeing). I figured that since it was Tuesday, I should be betting on more downturn, or at least not a full recovery and then some by the end of the day, so I ended up getting more puts, dumping my calls, and lost what I made earlier in the morning.

Since the moves during the summer are so small, I didn't really have much more to play with, so I left it alone for the last 3 hours.

Typical way for me to make money and then lose it, but, today was more bullish than it really should have been. Nevertheless, what I SHOULD have done is held both sides for longer than 10 minutes, especially when it's possibly at it's low for the day and you don't know what it's going to do. Had I done that, and not made the personal decision that today should be more bearish, then I would have been able to eventually see it was headed back upwards, and then I could have decided to dump my puts, while my calls would have already been in my portfolio.

So I basically followed my plan for half the day, then decided to not follow my plan. A common mistake that I make.

Anyways, the "hedging" worked out decently, though it's not a true "freeze" of my P/L, it's close.

Thanks again and appreciate any other feedback.

 

[CBC]

Go over and look at the Supertrader Karen thread if you want to see what a trolled thread looks like.

I recon uv taken this all the wrong way. I was just adding thoughts as other were.

The straddle will profit in either direction with time decay resultin in losses. This will be even money on both sides ( call and put ).

Hedge is usually profit in 1 direction with unrealized profits to cover losses on the main trade. I'm still pretty new at hedging but its something I like so I will always trade like this .

 

[stockspy456]

Go over and look at the Supertrader Karen thread if you want to see what a trolled thread looks like.

I recon uv taken this all the wrong way. I was just adding thoughts as other were.

The straddle will profit in either direction with time decay resultin in losses. This will be even money on both sides ( call and put ).

Hedge is usually profit in 1 direction with unrealized profits to cover losses on the main trade. I'm still pretty new at hedging but its something I like so I will always trade like this .

It's a good approach, if you have buying power to be able to do this. At least for me, I much rather hold equal amount both directions while the market decides where it's headed.

And yes, you're right . When it comes to text, adding any type of "emotion" to something that is written is hard to do, and many times taken the wrong way by the other side. I personally keep written text as non-emotional sounding as possible. I do not understand what big areas with bold text, underlined, all caps, really means. Or written responses that only tell me what I lack, but do not provide any suggestions (other than to give up) .

One style of teaching that is typically taken positively by the other party is to provide a path into understanding. For example, you've mentiined that what I am talking about is a straddle, and FSU described a very simple scenario of "hedging". If I misunderstood Handle, then Handle could have clarified what he was saying, or perhaps even called me out in asking if I was understanding what he was saying or not. Telling someone what they are and saying that they should go home doesn't even help that person learn anything. At least tell me to read about straddles, deltas, and thetas? Simple as that. The difficulty with writing responses sometimes requires a small period of time to sync up as to what sometime is trying to say. Perhaps I'm just more of an analytical person. We're all here to learn, so if someone knows the answer or can relate, then perfect. I wouldn't be going into threads writing out that the person is super uneducated, too amateur, etc. What's the point?

Also, this ongoing straddle technique/hedging during day trading actually reduces my number of trades that I make on a daily/weekly basis, because I'm not wasting transactions closing directions and opening directions and closing and opening, which is another benefit. At least that's part of the goal.

 

[stockspy456]

As a follow-up to this, I've found that turning my position into a vertical, rather than a straddle, is more efficient, because it returns buying power to me. Buying the opposite direction and manually creating a straddle (buying an equal amount of long Puts if I already hold "x" amount of long Calls, for example), looks to give me the same effect as creating a vertical out of my original position, with the benefit of getting buying power returned to me.

Although, I would then have one short position and one long position, which would mean that if I decide I want to keep the short position, I couldn't simply just close my long position because that would put me into negative buying power. So instead I would need to buy the opposite direction at that point, and then close my original vertical.

But, for my original desire of "freezing" my P/L, I might prefer this approach of turning my position into a vertical more so than the straddle method, entirely because of the fact that I will receive buying power back, which simply gives me more flexibility in choosing my next step, rather than the straddle version I would be tied to the two long positions that I have, and would only be able to abandon one of those once I "decide" which direction the market is going. In other words, I have more flexibility to change up my strike prices with the vertical method since I would have buying power, while with straddle I would be stuck with the strike prices of the open positions that I have.

 

[stockspy456]

also keeping in mind that if I do turn my position into a vertical, that I would have to be aware of whether it's a bullish or bearish vertical. If I have long 2030 calls and I see it could be turning down, I can sell 2025 calls to create a "bearish" vertical. In turn, if I am long calls and I see it perhaps continuing upwards but only slightly, and I would like to "freeze" that position, I can sell 2035 calls to create a "bullish" vertical.
Once I've made up my mind and see it continuing upwards, but still see risk, I can leave it as is, or reduce my short side to make it more weighed on the bullish side. If I see it turning down, at that point I might consider turning it into a bearish vertical.