My Nerves Are Shot

[Arnie Guitar]

I've got to learn a new shtick, this credit spread selling is wearing me out.

I was short the S&P 500 1295 puts, long the 1285's.

Today was a long day, the trade ticket was armed and ready to go to cover.

Where's the aspirin?...


The Egyptian Mubaric thing bit me a little, the Japanese Nuclear thing got close, but I was just far enough out of the money to be safe...just.

I've been doing this again since December after a year absence, now I remember why I took a break.

Risking thousands to make hundreds...nutz.

Where's the aspirin?...

 

[HowardCohodas]

Are you talking about the JUN2 2011 series or the JUN 2011 series?

If JUN2 2011 your short has a PoT (probability of being touched) of 88%.
If JUN 2011 your short has a PoT (probability of being touched) of 91%

I would be long gone on such shorts with those probabilities. When did you open that spread?

 

[ballsofgold]

i dont get what the problem is? you sold a put spread and the market came off? So what?

your option spread is very conservative considering the strikes are so close that you have very little convexity.


why are you nerves shot?

 

[atticus]

Quote from HowardCohodas:

Are you talking about the JUN2 2011 series or the JUN 2011 series?

If JUN2 2011 your short has a PoT (probability of being touched) of 88%.
If JUN 2011 your short has a PoT (probability of being touched) of 91%

I would be long gone on such shorts with those probabilities. When did you open that spread?

You really need to stop quoting touch-probability as though it's not implied in everyone's model. Selling a 10:1 spread at a 20% touch probability is not an edge.

 

[ballsofgold]

the snp dropped 16 points today, net change on this put spread was about 1.25, very lil gamma on this spread.

still trying to understand why his nerves are shot?

 

[HowardCohodas]

Quote from atticus:

You really need to stop quoting touch-probability as though it's not implied in everyone's model. Selling a 10:1 spread at a 20% touch probability is not an edge.

Expanding readers horizons on tools to estimate risk of touching is a good idea, whether or not you think it is an edge.

How a tool is used is important. The more tools in your tool kit the less likely you are to encounter the syndrome: if the only tool in your tool kit is a hammer, every problem looks like a nail.

Don't encourage ignorance by suggesting someone not mention a new tool.

 

[Maverick74]

Quote from HowardCohodas:

if the only tool in your tool kit is a hammer, every problem looks like a nail.

Don't encourage ignorance by suggesting someone not mention a new tool.

Take that Atticus! I bet you didn't see that hammer and nail response coming.

 

[HowardCohodas]

Quote from Maverick74:

Take that Atticus! I bet you didn't see that hammer and nail response coming.

I'm gratified that I still have some things to offer that were unexpected.

 

[kinggyppo]

Quote from Maverick74:

Take that Atticus! I bet you didn't see that hammer and nail response coming.

Risk is probably curled up in a ball somewhere, but seriously giving risk a lecture on probability of touching, that takes some gall!!Have a great weekend!

 

[newwurldmn]

Quote from HowardCohodas:

Are you talking about the JUN2 2011 series or the JUN 2011 series?

If JUN2 2011 your short has a PoT (probability of being touched) of 88%.
If JUN 2011 your short has a PoT (probability of being touched) of 91%

I would be long gone on such shorts with those probabilities. When did you open that spread?

Howard, how do you determine this? You must be building a tree of some kind using the implied vol surface. How to do you determine the nodes of the tree given that you don't have implied data for say jun 5th today. What assumptions are you making?