If you want to change the topic, then you might as well really change it.
Suppose instead of investing in credit spreads, wouldn't it be safer to take that money and invest it in a chain of pizza stores or strip clubs?
My OPTION TRADES..... part 2
- Thread starter Put_Master
- Start date
Suppose instead of investing in credit spreads, wouldn't it be safer to take that money and invest it in a chain of pizza stores or strip clubs?
BOOM! your theory just blew up when expanded beyond credit spreads to include the entire arsenal of weapons at a spread trader's disposal and now you want to change the subject.
My subject has always been the risks of credit spreads vs naked puts.
It really doesn't matter how many potential investment tools are at the disposal of a credit spread trader, if he choses to initiate a bull put spread. Hence that is the essense of my discussion.
If you wish to change the subject to the benefits and/or risks of debit spreads, going long a stock, IC's, ect.... feel free to. But it has nothing to do with the comparison under discussion.
Start a new discussion on the risks/benefits of debt spreads if you'd like to, as i think that too is worthy of discussion.
But it's a separate discussion than this one.
Another example of a similar type strategy would be a discussion of selling cash secured puts, vs a buy/write strategy.
Those are a similar type strategies. Just like credit spreads vs naked puts.
If you want a discussion about debit spreads, then link it to a similar type strategy.
Why are you trying to link debit spreads to a comparision of credit spreads vs naked puts?
BTW, a combo pizza store/strip club, actually does sound like a good investment.
wise man...I tried to sucker you in with a diversionary tactic but you didn't bite
Speaking of "bites", thanks to you I'm now going out for a bite of pizza. While there, I'll have to speak to them about my stripper idea.Quote from HurricaneUS:
wise man...I tried to sucker you in with a diversionary tactic but you didn't bite
Whose talking out of their ass now??..You are suggesting trading the Sept 665 putvs the Sept 660/640 Put spread on an apx 9-1 ratio?What kind of "jack ass tango" is that??
Sept 665 put has a .40 delta
660/640 puts spread has .15 delta..
2.5 to 1 ratio starts a real conversation.Anything other than that and you are stroking Putmeister..
And dont start with that reg T nonsense,unless you ar going to factor OTC trades.You and I both know you get smoked on the 9 spreads vs the 1 nude put because the 70 lot spread has over 3x the delta as the 8 naked puts.
Trade it on a 2.5 -1 ratio,and than we can have a conversation.You too putmeister..
Cmon Bro,you are better than that..
Sept 665 put has a .40 delta
660/640 puts spread has .15 delta..
2.5 to 1 ratio starts a real conversation.Anything other than that and you are stroking Putmeister..
And dont start with that reg T nonsense,unless you ar going to factor OTC trades.You and I both know you get smoked on the 9 spreads vs the 1 nude put because the 70 lot spread has over 3x the delta as the 8 naked puts.
Trade it on a 2.5 -1 ratio,and than we can have a conversation.You too putmeister..
Cmon Bro,you are better than that..
His math was off, but he made the correct point.
That with the APPLE spread the investors $100,000 account could potentially control over 3 MILLION DOLLARS.
With a naked put at max margin, about $250,000.
Thus, either 4 naked puts, or 50 credit spreads..... if my math is correct.
Either way.... the spread margin risk of over 30:1 vs a naked put risk of 2.5 :1 is insane.
It's actually 33:1 to be exact.
That with the APPLE spread the investors $100,000 account could potentially control over 3 MILLION DOLLARS.
With a naked put at max margin, about $250,000.
Thus, either 4 naked puts, or 50 credit spreads..... if my math is correct.
Either way.... the spread margin risk of over 30:1 vs a naked put risk of 2.5 :1 is insane.
It's actually 33:1 to be exact.
PM,of course one could do that...If you are a blithering idiot..
The question I pose to you and Atticus is would you rather be short 1 naked APPL 9 665 put or 2.5 AAPL 9 660-640 put spreads.
While one could max out the margin and be short 9 put spreads vs 1 naked put,the deltas arent remotely similar,so it a bad example...
The question I pose to you and Atticus is would you rather be short 1 naked APPL 9 665 put or 2.5 AAPL 9 660-640 put spreads.
While one could max out the margin and be short 9 put spreads vs 1 naked put,the deltas arent remotely similar,so it a bad example...
<<< PM,of course one could do that...If you are a blithering idiot.. >>>
But that is my point. Most spread traders invest as blithering idiots, because they are unaware of the actual risk to their accounts of initiating credit spreads. And the higher the strikes are the higher the risk.... regardless of what the strike gap is.
On the other hand, perhaps they do know, and are thus prepared to close down a deteriorating spread early.... very early.
Then what good is having a deep otm safety cushion, if you dare not let the stock get even close to it?
Granted ATTICUS's example was extreme. But he still make the important point that, whether you over concentrate in one stock, or diversify among 30 stocks at various strikes and gaps,.... if you are using your account for a spread strategy, whether in total or even if only 50% of your account is devoted to credit spreads,... the margin leverage risk you are exposing your account to is MASSIVE.
While it may not be 33:1 as in the ATTICUS spread example, but is 5:1 really any better?
Either way, you can't buy the stocks. Hence, if things go bad suddenly, your account is wiped out.
Or things could go bad "slowly", as you HOPE for a recovery, and don't close until the stock is deep between your strikes.
Is an 80% loss of ones account value, really much better than a total wipe out???
<<< The question I pose to you and Atticus is would you rather be short 1 naked APPL 9 665 put or 2.5 AAPL 9 660-640 put spreads. >>>
Your question lacks adequate info for me to make an intelligent, strategic, or a safe decision.
But that is my point. Most spread traders invest as blithering idiots, because they are unaware of the actual risk to their accounts of initiating credit spreads. And the higher the strikes are the higher the risk.... regardless of what the strike gap is.
On the other hand, perhaps they do know, and are thus prepared to close down a deteriorating spread early.... very early.
Then what good is having a deep otm safety cushion, if you dare not let the stock get even close to it?
Granted ATTICUS's example was extreme. But he still make the important point that, whether you over concentrate in one stock, or diversify among 30 stocks at various strikes and gaps,.... if you are using your account for a spread strategy, whether in total or even if only 50% of your account is devoted to credit spreads,... the margin leverage risk you are exposing your account to is MASSIVE.
While it may not be 33:1 as in the ATTICUS spread example, but is 5:1 really any better?
Either way, you can't buy the stocks. Hence, if things go bad suddenly, your account is wiped out.
Or things could go bad "slowly", as you HOPE for a recovery, and don't close until the stock is deep between your strikes.
Is an 80% loss of ones account value, really much better than a total wipe out???
<<< The question I pose to you and Atticus is would you rather be short 1 naked APPL 9 665 put or 2.5 AAPL 9 660-640 put spreads. >>>
Your question lacks adequate info for me to make an intelligent, strategic, or a safe decision.
I didn't make an argument for (delta) equivalence as it's not the point. My point is that arbitrary SEC limitations (help to) keep the public from blowing up. Do you honestly believe that the public retailer is looking at their delta position when writing credit spreads? They're using spreads to maximize the $credit. It's to protect them from their own stupidity and I personally don't think the public should be allowed to sell puts unless secured.
And asshat, who suggested "trading" the naked put? I was specific in my point that more traders have blown out in spreads than buy-writes (synth naked put) due solely to RegT. I don't do buy-writes and I don't write credit spreads.