[newbie question] Is $2000 enough to buy a bull put spread combo?

N

nwoptions

I'm interested in buying the September 18 70/60 bull put combo for GSX.

My stop loss price is $80. At this point, I will close the position.

Max return $160
Max loss $840.

I have $2000 to invest. Is it acceptable to trade an option with this amount?

Thanks
 
nwoptions said:
I'm interested in buying the September 18 70/60 bull put combo for GSX.

My stop loss price is $80. At this point, I will close the position.

Max return $160
Max loss $840.

I have $2000 to invest. Is it acceptable to trade an option with this amount?

Thanks
More...
If you take the trade and get stopped out, how much will you lose and what percentage of your $2000 is that?
 
Justrade said:
sure its enough
what are your odds?
I think your terminology may be off
More...

75% chance for max return
13% chance for max loss

according to Interactive Broker's Performance Profile for the spread

Do you have a minimum 'chance for max return' that you look for when trading credit spreads?
 
nwoptions said:
That's the correct reward:ratio.

What do kind of reward risk ratio do you like to see when putting on a credit spread?
More...

RR ratio wouldn't be great.

I promise myself never ever trade when reward risk ratio is soo poor even if win percent is high.
I made one terrible mistake before.
And I will never ever made that mistake again, now and forever, till end of time.
because next mistake might cost my life.

well. there are traders who trade when reward risk ratio is poor but win percent is high. so choose what suit you.
 
Last edited:
a good rule of thumb is about 1/3 to 1
and even thats not favourable
but only you know what your willing to accept
some risk more and some risk less
(some risk more to make less, some risk less to make more)
 
Axon said:
If you take the trade and get stopped out, how much will you lose and what percentage of your $2000 is that?
More...

Thanks for your response.

Sorry I can't answer this. Does this depend on what the value of both puts are on the day my stop loss is hit? Is there a way to tell this in advance?

I'm not sure if this is helpful but the MinInvest (in Interactive Brokers) is -156 (credit). This is the minimum amount required to invest in the strategy.
 
nwoptions said:
75% chance for max return
13% chance for max loss

according to Interactive Broker's Performance Profile for the spread

Do you have a minimum 'chance for max return' that you look for when trading credit spreads?
More...
What probability does your own calculation says is your chance for max return?

If it is > 75%, you have positive expectancy otherwise you won't be profitable in the long run.
 
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