Put_Master ..... any comments on this? Can you visualize the difference between the two as AAPL moves?
My OPTION TRADES..... part 2
- Thread starter Put_Master
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Put_Master ..... any comments on this? Can you visualize the difference between the two as AAPL moves?
I can buy the stock if i sold put.
i can't buy the spread.
Don't like that Plan "B" .
But again. I would not invest in AAPLe and certainly not at these prices.
Going out. Read you later.
i can't buy the spread.
Don't like that Plan "B" .
But again. I would not invest in AAPLe and certainly not at these prices.
Going out. Read you later.
PM,decipher what you wrote.
You dont speak in Atticus,yet lose me.
You can buy the stock if you sold put,but cant with a spread??
Why not?There is not a gun to your head forcing you to buy the equivalant number of shares for each short put spread.
Again,if AAPL trades down to 300 fast,you will be thankful you were short putspreads and not the put,and you will be into APPL stock at a lower cost basis with a number of shares you choose.
I know you know this...
You dont speak in Atticus,yet lose me.
You can buy the stock if you sold put,but cant with a spread??
Why not?There is not a gun to your head forcing you to buy the equivalant number of shares for each short put spread.
Again,if AAPL trades down to 300 fast,you will be thankful you were short putspreads and not the put,and you will be into APPL stock at a lower cost basis with a number of shares you choose.
I know you know this...
I don't invest just to place a trade and hope for the best.
I only invest in companies i like and at prices i like.
Give me a different price and I'll consider the trade.
Yes, i can buy only partial shares of APPL.
But again, you keep offering me an investment at a price I would never consider, and you don't understand why i don't want the trade?
I only consider investments I would consider owning for a period of time.
If I'm not willing to own it, then my only alternative is to take a loss.
I prefer investing with a Plan "B".
That is the problem spread traders have. Most have no Plan "B".
They are over leveraged, so they can't buy 80 - 90% of their stuff.
End result.... potential for a massive or total loss.
You'd better remember, investing is NOT about just trying to make money.
Any jackass can place a trade.
Investing is about RISK MANAGEMENT.
I took Att's AAPL example and followed up.If you know goober about options,its not a difficult task
I am not suggesting you should want to own AAPL at these prices(actually i am),but you should be able to come up with trades regardless.
If I read you correctly,it is not the concept of selling spreads that ruffles your feathers,it is way of "spread traders". It appears that your basic argument is spread traders are overleveraged,have no regard for initial delta and are out of control.
I dont know where,why or how you come up with the generalisations,so I will have to take your word for it.
Not to devalue RISK MANAGEMENT,but I would say its alot more valuable in the TRADING realgm,than in the Investing world...
I am not suggesting you should want to own AAPL at these prices(actually i am),but you should be able to come up with trades regardless.
If I read you correctly,it is not the concept of selling spreads that ruffles your feathers,it is way of "spread traders". It appears that your basic argument is spread traders are overleveraged,have no regard for initial delta and are out of control.
I dont know where,why or how you come up with the generalisations,so I will have to take your word for it.
Not to devalue RISK MANAGEMENT,but I would say its alot more valuable in the TRADING realgm,than in the Investing world...
Put, I can't speak for all Sread Traders... I always have a plan "B" and work to limit my downside risk. You keep talking about massive or total loss... The maximum loss on any credit spread is the difference between the strike prices of the two options minus the net credit received. There is built-in down side protection. You need to take in account, both legs of the spread,
Just because I have been trading these spreads for a short time, does not mean I do not understand risks or risks management.
And about this Play trade ... a 660/640 AAPL spread with AAPL at 673-674 ... If I was doing spreads on individual stocks, I would, maybe start at 595/585, but not at a 660. I never want to get close to ATM.
Web,there seems to be a disconnect between the PM views on spreads and his belief of spread traders..
I have no idea where he gets these ideas,and unfortunately he gets a bit off track.
Everyone in the option univers knows spreads have limited risk.Does not make them a better trading vehicle in terms of risk reward,but that is not what is being discussed.
I have no idea where he gets these ideas,and unfortunately he gets a bit off track.
Everyone in the option univers knows spreads have limited risk.Does not make them a better trading vehicle in terms of risk reward,but that is not what is being discussed.
<<< If I read you correctly,it is not the concept of selling spreads that ruffles your feathers, it is way of "spread traders". It appears that your basic argument is spread traders are overleveraged,have no regard for initial delta and are out of control. >>>
That would be a reasonable summation.
But the part about being out of control, refers back to them being over leveraged. However, it's not so much that they are over leveraged, per their "choice".
It's more along the line that most spread traders don't even know they are leveraged at all!
Let alone leveraged at 5... 10... 15 or even 20 times the value of their account.
Danshirley is a perfect example of that. He's been doing spreads for years, and had no idea he was even on leverage at all.
He spent several weeks arguing with me, telling me that i was crazy, and that he is NOT on margin. That there is no margin with spreads.
He finally asked his broker and apologized to me. He may have even thanked me for pointing it out to him.
I have no idea how leveraged he was, but he was selling a lot of spreads in the 40, 50 and 60 area.
GULP!
Now Dan doesn't do just credit spreads. He uses a variety of strategies. While his account was at more risk than he was aware of, it was not in the insane crazy degree of leverage, that traders who specialize in credit spreads are in.
A spread here and there is one thing. But a portfolio of "all" or even "mostly" spreads is another.
Those are the folks who need to be educated and warned.
THose are the accounts that can drop to zero in no time, during difficult times.
Most simply don't realize, that the "limited risk" of credit spreads, which is the aspect about them they find so apppealing,... refers to their account value. That their account value can not drop below zero.
They are overly focused on the limited risk "per trade", and NOT how too many of those individual trades going bad at once, can devastate their account value.
WHY?
Because they are over leveraged and don't know it. Hence their only choice during difficult times, is to sell for a loss.
If you are trading spreads as a strategy, you have no plan "B", for 90% of your trades, during difficult times.
It's actually more than 90%, but I'll save that discussion for another day.
That would be a reasonable summation.
But the part about being out of control, refers back to them being over leveraged. However, it's not so much that they are over leveraged, per their "choice".
It's more along the line that most spread traders don't even know they are leveraged at all!
Let alone leveraged at 5... 10... 15 or even 20 times the value of their account.
Danshirley is a perfect example of that. He's been doing spreads for years, and had no idea he was even on leverage at all.
He spent several weeks arguing with me, telling me that i was crazy, and that he is NOT on margin. That there is no margin with spreads.
He finally asked his broker and apologized to me. He may have even thanked me for pointing it out to him.
I have no idea how leveraged he was, but he was selling a lot of spreads in the 40, 50 and 60 area.
GULP!
Now Dan doesn't do just credit spreads. He uses a variety of strategies. While his account was at more risk than he was aware of, it was not in the insane crazy degree of leverage, that traders who specialize in credit spreads are in.
A spread here and there is one thing. But a portfolio of "all" or even "mostly" spreads is another.
Those are the folks who need to be educated and warned.
THose are the accounts that can drop to zero in no time, during difficult times.
Most simply don't realize, that the "limited risk" of credit spreads, which is the aspect about them they find so apppealing,... refers to their account value. That their account value can not drop below zero.
They are overly focused on the limited risk "per trade", and NOT how too many of those individual trades going bad at once, can devastate their account value.
WHY?
Because they are over leveraged and don't know it. Hence their only choice during difficult times, is to sell for a loss.
If you are trading spreads as a strategy, you have no plan "B", for 90% of your trades, during difficult times.
It's actually more than 90%, but I'll save that discussion for another day.