I believe we are currently having a polite and constructive dialog. Not bickering.
I'll continue the dialog in the morning.
I'll continue the dialog in the morning.
My OPTION TRADES..... part 2
- Thread starter Put_Master
- Start date
My last dozen or so trades were posted under Ryan's MY OPTION TRADE original thread.
Anyone can look them up. They all went well. Only one that went bad was my $17.50 WMS August put. I currently have a $17.50 covered call on it. Credit of $1.00 which I put on it this past week, when it traded at $16.30.
I post my trades in real time, for all to observe, discuss, consider, question and criticize. If I'm unable to post a trade that day, I don't post it at all. It's either done in real time or not at all.
Sharing them in real time is done mostly for my own benefit. That being, because everyone knows about them, it makes me want to be more careful in what I select, and thus be less speculative.
<<< Put_master keeps attributing to me a strategy I don't follow. He says I max out my account on bull put spread margin. I never do that. My portfolio has a good deal of counter-market holdings... >>>
I know your account is not 100% credit spreads.
But I responded the way I did for 2 reasons.
First,... in a couple of posts many weeks ago, you kept re-stating that credit spread traders are NOT using leverage. That your only margin requirement was the difference in your strikes times the number of contracts.
Thus, you felt there was no reason to keep a cash reserve . And that there was no reason not to use all of ones cash in a spread strategy, if one wanted to.
(Per your last post, you now acknowledge that spread traders do in fact use leverage. They just don't get charged margin interest for doing so. But it is still "real margin").
And secondly,... when I (and the rest of us), state something, it's not just the one person we are addressing that read it. There is a world wide audience. I wanted to be sure others realized the potential "hidden" dangers of credit spreads as well.
There are some fantastic advantages to credit spreads. But that "hidden" danger of potentially being on leverage of 10 times your account value, (and not even being aware of it), is something I wanted other spread traders to be informed of as well.
<<< Sooo.... Put_master is right to say I shouldn't max out my account on bull put margin because I would be killed in a crash >>>
Doesn't even have to be a crash. It can be a slow and fluctuating, up and down drop, over a period of weeks or months. The kind that can gradually sneak up on you, as it doesn't really concern you because you have an OTM safety cushion, and put protection.
It's so gradual, that spread traders may let it get closer to their strikes than they should,.... unaware of the hidden margin leverage danger they are in.
Unaware of how quickly ones account value can drop by 30 - 50% once the stock trades between their 2 strikes. Or be totally wiped out, if the stock trades just a penny below both strikes.
Whether it's a crash, or the slow drip of a gradual drop, the devastating end result of not managing ones risk before it's too late, is the same.
<<< BTW: I HAVE repeatedly said my thread was trade discovery... not portfolio management. Here we are talking portfolio management, and I usually don't talk portfolio management because it is a complex subject and there is much more to consider than just this. >>>
I know your thread was more about trade discovery than trade management.
But you have a world wide audience that may not go back several weeks, months or a year, to read that. All they know is that your thread is called CONSERVATIVE OPTION TRADES, and that you have posted those trades have a 94 - 97% probability of being successful.
Novice investors may be encouraged to follow your example, unaware of the potential hidden dangers they may be putting themselves in. Until recently, even you were not aware of the true risk of your credit spread trades.
It was because you labled your thread CONSERVATIVE OPTION TRADES, that i gave you a difficult time. I felt that title was misleading,..... (and i still do.)
<<< Let me close with this: I completely disagree with put_master's short put philosophy for one reason: In the ordinary course of events A stock that has dropped and is put to me is not one I want to hold... no matter HOW well I think I have researched the company. >>>
If an investor doesn't want to hold a stock that is put to them, that is a personal decision, and i would never disagree with that decision.
But for most traders, there is a difference between a stock that drops 2 - 3 pennies below your strike(s), and one that drops 2 - 3 dollars.
HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out.
It's one thing to CHOOSE not to buy the stock.
It's another to be FORCED not to buy the stock.
FORCED to sell for a potentially devastating loss, because of the hidden danger of margin leverage, that many spread traders don't even realize they are on.
I know your account is not 100% credit spreads.
But I responded the way I did for 2 reasons.
First,... in a couple of posts many weeks ago, you kept re-stating that credit spread traders are NOT using leverage. That your only margin requirement was the difference in your strikes times the number of contracts.
Thus, you felt there was no reason to keep a cash reserve . And that there was no reason not to use all of ones cash in a spread strategy, if one wanted to.
(Per your last post, you now acknowledge that spread traders do in fact use leverage. They just don't get charged margin interest for doing so. But it is still "real margin").
And secondly,... when I (and the rest of us), state something, it's not just the one person we are addressing that read it. There is a world wide audience. I wanted to be sure others realized the potential "hidden" dangers of credit spreads as well.
There are some fantastic advantages to credit spreads. But that "hidden" danger of potentially being on leverage of 10 times your account value, (and not even being aware of it), is something I wanted other spread traders to be informed of as well.
<<< Sooo.... Put_master is right to say I shouldn't max out my account on bull put margin because I would be killed in a crash >>>
Doesn't even have to be a crash. It can be a slow and fluctuating, up and down drop, over a period of weeks or months. The kind that can gradually sneak up on you, as it doesn't really concern you because you have an OTM safety cushion, and put protection.
It's so gradual, that spread traders may let it get closer to their strikes than they should,.... unaware of the hidden margin leverage danger they are in.
Unaware of how quickly ones account value can drop by 30 - 50% once the stock trades between their 2 strikes. Or be totally wiped out, if the stock trades just a penny below both strikes.
Whether it's a crash, or the slow drip of a gradual drop, the devastating end result of not managing ones risk before it's too late, is the same.
<<< BTW: I HAVE repeatedly said my thread was trade discovery... not portfolio management. Here we are talking portfolio management, and I usually don't talk portfolio management because it is a complex subject and there is much more to consider than just this. >>>
I know your thread was more about trade discovery than trade management.
But you have a world wide audience that may not go back several weeks, months or a year, to read that. All they know is that your thread is called CONSERVATIVE OPTION TRADES, and that you have posted those trades have a 94 - 97% probability of being successful.
Novice investors may be encouraged to follow your example, unaware of the potential hidden dangers they may be putting themselves in. Until recently, even you were not aware of the true risk of your credit spread trades.
It was because you labled your thread CONSERVATIVE OPTION TRADES, that i gave you a difficult time. I felt that title was misleading,..... (and i still do.)
<<< Let me close with this: I completely disagree with put_master's short put philosophy for one reason: In the ordinary course of events A stock that has dropped and is put to me is not one I want to hold... no matter HOW well I think I have researched the company. >>>
If an investor doesn't want to hold a stock that is put to them, that is a personal decision, and i would never disagree with that decision.
But for most traders, there is a difference between a stock that drops 2 - 3 pennies below your strike(s), and one that drops 2 - 3 dollars.
HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out.
It's one thing to CHOOSE not to buy the stock.
It's another to be FORCED not to buy the stock.
FORCED to sell for a potentially devastating loss, because of the hidden danger of margin leverage, that many spread traders don't even realize they are on.
Glad to see you posting again.
But why do you say trade ATM or don't trade?
Isn't one of the joys and advantages of trading via options, that we can decide whether we want to select prices ATM, OTM or even ITM?
Isn't it an advantage to have the ability to begin "managing our risk", even prior to initiating the trade,... depending on our outlook for the stock, our % return goals, our risk/reward tolerances, ect.....
"There is a world wide audience"
You flatter us...I doubt if 10 people read this forum... and that number is going down the more we bicker.
"HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out."
This is simply not so.
e.g. if I have a 15/10 bull put spread on a stock and allow the spread to expire with the stock at 14.50 . My broker will allow me to be put and then sell the stock at 14.50 so I am at a P/L of .50 per unit. If I have gotten .35 for the spread my net loss is .15 per unit . If the dip is further into the spread the loss will be larger.
Exp
Price....................P/L
15___________ .35
14.50 ________(.15)
14__________ (.65)
13__________ (1.65)
12__________ (2.65)
11__________ (3.65)
10__________ (4.65)
9 __________ (4.65)
This, of course assumes I would let the spread go to expiration which I wouldn't.
AND
Try not to use hyperbolic phraseology like "Total Wipe Out". It makes us seem like boardies. If one loses a few dollars on a trade this is not a "WIPE OUT !!!!!!" for christ's sake.
While we're at it lets look at that same picture for a naked short put where I have gotten .50 for the naked put:
........................Spread...........Naked
Price....................P/L................P/L
15___________ .35_________ .50
14.50 ________(.15)________ 0
14__________ (.65)________ (.50)
13__________ (1.65)_______ (1.50)
12__________ (2.65)_______ (2.50)
11__________ (3.65)_______ (3.50)
10__________ (4.65)_______ (4.50)
9 __________ (4.65)________ (5.50)
8 __________ (4.65) _______ (6.50)
7 __________ (4.65) _______ (7.50)
Which is more 'conservative' .... I guess it's a matter of taste.
I suggest we stop this argument and call it a draw. I'm tired of it and I am sure the forum is also. If you feel the need for the last word take it... but then lets drop it. Here's MY last word: Spreads are better.
You flatter us...I doubt if 10 people read this forum... and that number is going down the more we bicker.
"HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out."
This is simply not so.
e.g. if I have a 15/10 bull put spread on a stock and allow the spread to expire with the stock at 14.50 . My broker will allow me to be put and then sell the stock at 14.50 so I am at a P/L of .50 per unit. If I have gotten .35 for the spread my net loss is .15 per unit . If the dip is further into the spread the loss will be larger.
Exp
Price....................P/L
15___________ .35
14.50 ________(.15)
14__________ (.65)
13__________ (1.65)
12__________ (2.65)
11__________ (3.65)
10__________ (4.65)
9 __________ (4.65)
This, of course assumes I would let the spread go to expiration which I wouldn't.
AND
Try not to use hyperbolic phraseology like "Total Wipe Out". It makes us seem like boardies. If one loses a few dollars on a trade this is not a "WIPE OUT !!!!!!" for christ's sake.
While we're at it lets look at that same picture for a naked short put where I have gotten .50 for the naked put:
........................Spread...........Naked
Price....................P/L................P/L
15___________ .35_________ .50
14.50 ________(.15)________ 0
14__________ (.65)________ (.50)
13__________ (1.65)_______ (1.50)
12__________ (2.65)_______ (2.50)
11__________ (3.65)_______ (3.50)
10__________ (4.65)_______ (4.50)
9 __________ (4.65)________ (5.50)
8 __________ (4.65) _______ (6.50)
7 __________ (4.65) _______ (7.50)
Which is more 'conservative' .... I guess it's a matter of taste.
I suggest we stop this argument and call it a draw. I'm tired of it and I am sure the forum is also. If you feel the need for the last word take it... but then lets drop it. Here's MY last word: Spreads are better.
Quote from danshirley:
"There is a world wide audience"
You flatter us...I doubt if 10 people read this forum... and that number is going down the more we bicker.
"HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out."
This is simply not so.
e.g. if I have a 15/10 bull put spread on a stock and allow the spread to expire with the stock at 14.50 . My broker will allow me to be put and then sell the stock at 14.50 so I am at a P/L of .50 per unit. If I have gotten .35 for the spread my net loss is .15 per unit . If the dip is further into the spread the loss will be larger.
Exp
Price....................P/L
15___________ .35
14.50 ________(.15)
14__________ (.65)
13__________ (1.65)
12__________ (2.65)
11__________ (3.65)
10__________ (4.65)
9 __________ (4.65)
This, of course assumes I would let the spread go to expiration which I wouldn't.
AND
Try not to use hyperbolic phraseology like "Total Wipe Out". It makes us seem like boardies. If one loses a few dollars on a trade this is not a "WIPE OUT !!!!!!" for christ's sake.
While we're at it lets look at that same picture for a naked short put where I have gotten .50 for the naked put:
........................Spread...........Naked
Price....................P/L................P/L
15___________ .35_________ .50
14.50 ________(.15)________ 0
14__________ (.65)________ (.50)
13__________ (1.65)_______ (1.50)
12__________ (2.65)_______ (2.50)
11__________ (3.65)_______ (3.50)
10__________ (4.65)_______ (4.50)
9 __________ (4.65)________ (5.50)
8 __________ (4.65) _______ (6.50)
7 __________ (4.65) _______ (7.50)
Which is more 'conservative' .... I guess it's a matter of taste.
I suggest we stop this argument and call it a draw. I'm tired of it and I am sure the forum is also. If you feel the need for the last word take it... but then lets drop it. Here's MY last word: Spreads are better.
Could you? Thanks.
<<< "HOWEVER, for the spread trader, there is no difference. Whether the drop is 2 pennies or 2 dollars, the end result is the same. A total wipe out." This is simply not so. >>>
I am refering to a drop below both your strikes.
Once the stock drops below both the spread traders strikes, the loss is 100%. A total wipe out. Makes no difference if the drop is 2 pennies or 2 dollars.
(I'm not going to quibble about some theoretical potential time remaining on the contract, that may add back a few pennies if you close the contract at that point.)
The bottom line is.... for a spread trader who does not "intend" to buy the stock, or can not afford to buy the shares because of the potential for excessive leverage,... the loss is a "wipe out" of all the money invested in the trade or trades.
The naked put seller, because he can only margin up to 2 - 3 times his account value, vs the potential for more than 10 times leverage of the spread trader,... the naked put seller can still afford to "consider" buying the stock. Then sell calls to raise cash, collect dividends, and wait for a full or partial recovery.
The issue NOT whether one should buy the stock.
The issue is whether one has the ability to CHOOSE whether to buy or not.
The leveraged naked put seller can usually choose. The leveraged spread seller is forced not to choose.
Thus, once the stock drops below both his strikes, the loss is 100% of the cash invested. Makes no difference if the drop is 2 pennies or 2 dollars.
I am refering to a drop below both your strikes.
Once the stock drops below both the spread traders strikes, the loss is 100%. A total wipe out. Makes no difference if the drop is 2 pennies or 2 dollars.
(I'm not going to quibble about some theoretical potential time remaining on the contract, that may add back a few pennies if you close the contract at that point.)
The bottom line is.... for a spread trader who does not "intend" to buy the stock, or can not afford to buy the shares because of the potential for excessive leverage,... the loss is a "wipe out" of all the money invested in the trade or trades.
The naked put seller, because he can only margin up to 2 - 3 times his account value, vs the potential for more than 10 times leverage of the spread trader,... the naked put seller can still afford to "consider" buying the stock. Then sell calls to raise cash, collect dividends, and wait for a full or partial recovery.
The issue NOT whether one should buy the stock.
The issue is whether one has the ability to CHOOSE whether to buy or not.
The leveraged naked put seller can usually choose. The leveraged spread seller is forced not to choose.
Thus, once the stock drops below both his strikes, the loss is 100% of the cash invested. Makes no difference if the drop is 2 pennies or 2 dollars.
<<< "There is a world wide audience"
You flatter us...I doubt if 10 people read this forum... >>>
You assume the only people reading the boards on ET are those who post.
I, and many folks I've known in the past, have read the board for years, before deciding to post. And most never post.
I have no idea if there are dozens or hundreds that read the board.
I only know the potential readers are world wide.
You flatter us...I doubt if 10 people read this forum... >>>
You assume the only people reading the boards on ET are those who post.
I, and many folks I've known in the past, have read the board for years, before deciding to post. And most never post.
I have no idea if there are dozens or hundreds that read the board.
I only know the potential readers are world wide.