My OPTION TRADES..... part 2

atticus · Aug 28, 2012

Quote from Put_Master:

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.

Where was my math incorrect? I did a RegT calc on IBTWS (for the naked) and the req per credit spread is a hair under $1,400 per. The short put initial req is $13,7xx.

Put_Master · Aug 28, 2012

<<< I didn't make an argument for (delta) equivalence as it's not the point. >>>

I really have no idea why folks keep trying to change the subject from naked puts vs credit spreads, into a discussion of debit spreads, deltas, and so on.
They are all irrelevant to the point of the discussion and debate..

Appleseed · Aug 28, 2012

Quote from Appleseed:

"And for what it is worth,I will almost guarantee that more money has been lost in the equity markets by naked put sellers than "overleveraged" put spread sellers"

Atticus

WHY ARE YOU ATTRIBUTING the above quote to me ??

I would say you are brainless...but on second thought ......that would be a compliment

cheers
john

atticus · Aug 28, 2012

Quote from Appleseed:

08-28-12 01:43 PM

Putmaster,where did you come up with these observations??

I really dont have an axe to grind either way,but your arguments represent knuckleheads not spread traders..

Put spreads are less risky than naked puts.Options 101.
Nothing to do with margin requirements.Again,you are talking sixe,Big Boy

And for what it is worth,I will almost guarantee that more money has been lost in the equity markets by naked put sellers than "overleveraged" put spread sellers..
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Now i know how the interrogaters felt when they questioned
BERNIE MADOFF investment philosophies and his defense of them

"Split strike conversion strategy.."

cheers
john

atticus · Aug 28, 2012

Quote from Appleseed:

Quote from Appleseed:

"And for what it is worth,I will almost guarantee that more money has been lost in the equity markets by naked put sellers than "overleveraged" put spread sellers"

Atticus

WHY ARE YOU ATTRIBUTING the above quote to me ??

I would say you are brainless...but on second thought ......that would be a compliment

cheers
john

Here you go.

Put_Master · Aug 28, 2012

Quote from atticus:

Where was my math incorrect? I did a RegT calc on IBTWS and the req per credit spread was a hair under $1,400 per. The short put initial req is $13,7xx.

You stated that you had $100,000 to invest in a 660/640 APPL credit spread.
There is a 20 point strike gap.
I divide 20 into 100,000 = 5,000 = 50 contracts.
If I create a credit spread using that $100,000 (50 contracts), that money is potentially controlling $660 x 5000 shares = $3,330,000.
Thus $100,000 potentially controlling $3,300,000 = a 33:1 margin risk.
Am i mistaken?

As for the naked put seller, i was assuming that $100,000 could be margined to approximately $250,000.
Thus enough to buy 4 contracts at your $665 price.

atticus · Aug 28, 2012

Quote from Put_Master:

You stated that you had $100,000 to invest in a 660/640 APPL credit spread.
There is a 20 point strike gap.
I divide 20 into 100,000 = 5,000 = 50 contracts.
If I create a credit spread using that $100,000 (50 contracts), that money is potentially controlling $660 x 5000 shares = $3,330,000.
Thus $100,000 potentially controlling $3,300,000 = a 33:1 margin risk.
Am i mistaken?

Ya, you are. The credit rec'd reduces the req. The credit per was a bit over $6 ($600).

Appleseed · Aug 28, 2012

Quote from taowave:

Putmaster,where did you come up with these observations??

I really dont have an axe to grind either way,but your arguments represent knuckleheads not spread traders..

Put spreads are less risky than naked puts.Options 101.
Nothing to do with margin requirements.Again,you are talking size,Big Boy

And for what it is worth,I will almost guarantee that more money has been lost in the equity markets by naked put sellers than "overleveraged" put spread sellers..

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ORIGINAL POST
CHEERS
JOHN

Put_Master · Aug 28, 2012

Quote from atticus:

Ya, you are. The credit rec'd reduces the req. The credit per was a bit over $6 ($600).

Ok, I was ignoring the credit to keep it simple.
But then you are saying I could actually leverage the spread even more than 33:1???
Same with the naked put.
But the MASSIVE leverage gap between the 2 strategies, still remains similarly risky and MASSIVE.
Correct?

atticus · Aug 28, 2012

Quote from Appleseed:

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ORIGINAL POST
CHEERS
JOHN

Well considering the fact that I am not clairvoyant and your quoting skills are below retard... it was your mistake, not mine.