My OPTION TRADES..... part 2

[atticus]

Quote from Put_Master:

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 MASSIVE.
Correct?

Well they're not equivalent in delta-terms, but delta has various moments of convexity. The spread accumulates deltas much faster (higher gamma and +speed), making tao's argument moot, but that was not remotely my point.

If any of you are under the assumption that I give a fuck if you blow up, you're wrong (well, I don't want to see you blow-up). I am not trying to save anyone from themselves, the SEC IS DOING THAT.

The fact remains that most traders lever-up in spreads because by their nature they're DELIMITED bets. For the same reason pros will avoid a short backspread in favor of a fly, even if there is a ton of skew in the wing (think long fly, bear delta, index).

Another example. In OTC mkts in exotics it's almost always more favorable to trade the american DNT over the euro digital double. The digital double is a pick-em proposition at either KO, which is a bad position to be in, while the DNT is a total loss... but the DNT is 1/2 the debit of the 2x-digital. I'd rather take the discount from inception (or go much wider on the KOs at the equiv debit) than pray that spot trades one tick in my favor in the digital double at the KO.

 

[Put_Master]

<<< If any of you are under the assumption that I give a fuck if you blow up, you're wrong (well, I don't want to see you blow-up). I am not trying to save anyone from themselves, the SEC IS DOING THAT. The fact remains that most traders lever-up in spreads because by their nature they're DELIMITED bets.

The SEC and me.
Actually, I really don't give a hoot either. I just want to make sure spread traders realize the potential risk they are potentially getting themselves into,... as I believe most traders who get into credit spreads do it for the safety and limited risk they think it offers.
When in fact, the safety and limited risk a credit spread offers is NOT for the trader. It's for their broker, as they will simply close down any spread that puts their company at risk.

 

[webicknell]

Quote from atticus:

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.

"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".

I just want to add a little here... I do use credit spreads... The first thing I look at is the delta position, not the size of the credit premium.... If the delta does not meet my criteria, the size of the credit does not matter.

And while I am here... PM... the definition of "adjustment" is not "close the trade"... that is an option as well as a few other alternatives, such as rolling out to a later month or to a farther OTM strike.

 

[atticus]

Quote from webicknell:

And while I am here... PM... the definition of "adjustment" is not "close the trade"... that is an option as well as a few other alternatives, such as rolling out to a later month or to a farther OTM strike.

You're not quoting me (above) but I disagree. There is no functional/practical/best-practice hedge for any credit spread under 10-deltas. Either the hedge becomes the primary-risk or the hedge was unnecessary (in hindsight). That's what makes credit spreads (DOTM) an IQ test (not directed at anyone in this thread).

"Rolling" is not a trade adjustment. It's a standalone with a new vol-figure and greek profile.

 

[Put_Master]

Quote from webicknell:

And while I am here... PM... the definition of "adjustment" is not "close the trade"... that is an option as well as a few other alternatives, such as rolling out to a later month or to a farther OTM strike.

Rolling a deteriorating trade is CODE for 'close the trade",....and then get right back into the same deteriorating stock, but at a new strike and/or month.
You can use whatever code word you prefer, but the reality is, rolling is code for closing the trade. And it doesn't matter if you get back in 3 seconds or 3 days later. If you are rolling, you are closing the trade, and then getting back into the same deteriorating stock.

Now, doing that sounds like a stupid thing to do.
Hence the reason someone came up with the term "rolling".
Rolling sounds much more intelligent and strategic, than saying I'm getting out of this deteriorating trade and then getting right back into it.

 

[webicknell]

Quote from atticus:

You're not quoting me (above) but I disagree. There is no functional/practical/best-practice hedge for any credit spread under 10-deltas. Either the hedge becomes the primary-risk or the hedge was unnecessary (in hindsight). That's what makes credit spreads (DOTM) an IQ test (not directed at anyone in this thread).

"Rolling" is not a trade adjustment. It's a standalone with a new vol-figure and greek profile.

I give up.... I will not try to defend my points... I am not as skilled as you guys... I play it conservative and I am doing well and will take the hit before I get into real trouble... Later

 

[atticus]

Quote from webicknell:

I give up.... I will not try to defend my points... I am not as skilled as you guys... I play it conservative and I am doing well and will take the hit before I get into real trouble... Later

You need not be defensive. I am stating an opinion based upon experience. Good luck with the credit spreads.

 

[cdcaveman]

Credit spreads are no joke a good way to super lever a blow out... your actually way better of ratio back spreading DOTM. Because it is gamma positive and Vega positive... meaning if vol goes way up or if you get a directional pass of your strikes your actually in great shape! I gave up credit spreading and moved to butterflies and ratio backsprrads... the straight selling of puts doesn't really get me going either. Even when buy write strategies work out it really is more about your ability to pick stocks and predict the future... which as history shows not a lot of people are good at

 

[webicknell]

Quote from Put_Master:

Rolling a deteriorating trade is CODE for 'close the trade",....and then get right back into the same deteriorating stock, but at a new strike and/or month.
You can use whatever code word you prefer, but the reality is, rolling is code for closing the trade. And it doesn't matter if you get back in 3 seconds or 3 days later. If you are rolling, you are closing the trade, and then getting back into the same deteriorating stock.

Now, doing that sounds like a stupid thing to do.
Hence the reason someone came up with the term "rolling".
Rolling sounds much more intelligent and strategic, than saying I'm getting out of this deteriorating trade and then getting right back into it.

I give up.... I will not try to defend my points... I am not as skilled as you guys... I play it conservative and I am doing well and will take the hit before I get into real trouble... Later

 

[webicknell]

Quote from atticus:

You need not be defensive. I am stating an opinion based upon experience. Good luck with the credit spreads.

Atticus, been reading many of your post and do very much respect your knowledge and how you interact with others here... I can't say that about everybody.
Back in February, I could say I never even thought of trading an option.... In March, I didn't know what a spread was,,,, Maybe by this time next year I will better understand Greeks.
Ignorant, I am not... Ignorant with respect to options, probably so.... I still consider myself an absolute nube

Thanks.... I do learn from your posts