OEX weekly options

Stanford

It is difficult to know the fill problems until you move into CASH trading. Using scratch paper, or the TOS paper money web site, can be misleading on that part of it. The OEX is a BIG solid index though and I suspect no problem getting fills there. On the NDX I have no clue? I'm switching over to NDX this week to try it in the TOS account. It works out about even with OEX and NDX as to returns on margin. You get roughly the same percentage. Cash wise I think you come out a bit better in the NDX, but not as a percentage. The premiums are higher which make up for being a smaller number of trades due to margin requirements. Plus you can usually go one or two strikes further out than in the OEX. I trade 50 contracts on the OEX and was just looking at it now and it seems I will have to trade 15 contracts, because of the difference in margin requirements on the NDX. $500 vs $2500 per contract on the NDX for available capital.

On the deviation. I was accustomed to thinking in STRIKES in the OEX but one strike in the OEX is 1% deviation. In the NDX I'm not sure what it is at a 4 to 1 ratio. So I'm just going to use the percentage to get equivalencies. If the NDX is 1870, then times 4% subtracted,or added, will give you, UP or DOWN the strike you can work.

As to my trying other indexes. Only time will tell. Got to make a BIG BANK before one needs to spread oneself among different indexes due to having 'too much money'. Say a couple of million dollars to trade.

As to BULL or CALL credit Vertical spreads. The market game has changed. We are now in a BULL TREND. We have come out of the congestion and back and forth of the turning point. So I'm working PUT spreads under the trend and since another TOP spread as in an IRON CONDOR is margin free, will probably leg into the bottom first and then leg into a top spread later in the week, for weeklies, after I'm sure the BULL TREND is not pulling back.

I'm running about four different strategies this week on scratch paper to see how the premiums and action moves.

I would not want to post how I know the bull trend has started on here. These readers are very close mouthed about their trading systems. I'd like to share, but the players on here are not for the most part telling what they are doing, if they have winning strategies. If you email me home, I'll give you my two indicators that tell you how to know that.

Trading Journal is an exception! Much to be admired. You can't trust advice from people who make claims on here, and blow up their egos with fancy technical jargon and sophisticated rap. Talking crap about us amateur newbies. Unless they post their trades each week and their wins, losses and running account balance, their advice is crap usually. Most of them lose more than they win. The whole point of spread trading strategies is NEVER to lose. Or what is the point? You can do better financially in directional trading with slightly more risk, due mostly to OVERTRADING.

The thing is to keep your RISK low as possible and find a MONEY MAKING CROP OF ONE OR TWO STRATEGIES YOU KNOW WELL. Then repeat them over and over and over again. Harvesting money is a boring game if you are doing it right. ( just my opinion)

I've got about 4 strategies I'm trying this week. I can tell you before hand, even though this is a BULL TREND, the simple bull directional debit BUY trade will lose money ( in the monthlies) The time decay for a slow incremental moving market is bigger than the gains. I'm trying it anyway for comparison purposes against the simple directional BULL debit Spread. That's a bit of knowledge I remember from 25 years ago. Never did spreads back then, the knowledge was not easily available as it is today with the internet.
Luck to you this week! As a professional courtesy, got my broken tooth started with the root canal process. Took out the nerve on Saturday. As a dentist that might interest you. Going back Wednesday for the next step. Root canal here in Belize is $250 usa. You have to chase the chickens out of the surgery! Had a tumor cut out a few weeks ago, one hour outpatient surgery, cost $70 usa and included pain killers and antibiotic pills. See, you are overpaid up in Canada. ( grin! )
 
Wow Stanford!!! SCRATCH PAPER TRADES

BULL CALL SPREADS PERFORMANCE

Talking about being a very confused old man. Been trying to find scraps of paper on my desk top. It is a litter of notes.

I put some scrap paper trades on Friday. With a jump this morning Monday in the index, I'm trying to figure them out and still a couple of other strategies also.

Anyway CLOSED the Friday BULL CALL debit Spread. It was put on the OEX October monthly for a debit of (- $2.40) Closed it out at + $7.60. Subtract the two and you get a gross profit of $5200 on ten contracts. Very confusing. Not sure I have it right for an index jump of about OEX 4 points. Can't believe it?

I'm putting on another one in the OCT monthly. My problem was I didn't make enough notes on STRIKES, dates, Monthly and which month and weeklies differentation. Then I also had trouble remembering you buy the more expensive one and sell the cheaper one for a debit. Had to go to the internet again and read up on it.

Have to do it again. Not at all sure I have it right?
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I was trying to transpose this to the NDX and got so confused, came back to the OEX.
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The next one is for BUY the OCTOBER monthly 510 OEX at $9,80 and SELL the OCT 515 at $6.80 for a debit of $3 @ 5 contracts. That gives me a more reasonable DEBIT of( -$1500).
The OEX is at 508.07

See in a day or two what happens to this one? With a bit more reference learning detail.
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straight BUY OCTOBER CALLS in the OEX Friday Sept. 10th

Bought 2 contracts OEX OCT 500 @ $12.50 (= $2500 bet)
Current value this Monday morning $15.80 or $3.30 gain, = $3160
$3160 - $2500 = gross increase of =$660
We'll let this one ride this morning for another day. I expect the BULL TREND to run through the week.
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BULL CREDIT SPREAD IN THE NDX ( bought this Monday morning )

NDX 2000 OCTOBER 2 contracts for $11.30 or (- $22.60)
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HORIZONTAL TIME SPREAD Placed Monday morning. ( courtesy of Trade Journal recommendation )

WEEKLY OEX sell 2 -( expiration week for Sept. ) 520 CALL @ .25 cents
MONTHLY OCTOBER Buy 2 - 520 @ $4.90, for a DEBIT OF -$.4.65 x 200 = ( -$980) for the bet.
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Going to have to use this learning forum to keep the record as my notes tend to get lost in the mess on my desk and wind blowing through the open window and door.
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Now it is time to go play my TOS regular weekly TIME DECAY trade.
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Okay Stanford.

Half of my weekly credit spread trade is on.

TOS account web based funny money trading.

15 NDX Weekly, 1825/1800 Puts @.30 cents. a credit of = +$450

The TOS account balance is now $88,781.45. I had it up to a couple of thousand above the original starting balance of $100,000 but in the learning process in credit spreads. I lost two trades.
Forget exactly, but one credit spread trade cost me $20,000 to $22,000 and I'm working my way out of the hole still on that one. The second trade I closed the credit spread on a Friday afternoon and all I lost were commissions. The account went down to $82,000 over that lost credit spread, a month or more back. So I've made about $6000 back using credit spreads. All other new strategies are still being done on scratch paper until I'm comfortable enough to switch them over to the the TOS account. Probably start with some cash when I break even again at $100,000.
 
falconview, is there much difference between the weekly NDX vs the monthly in the last week, in terms of credit? Or do they even have a weekly during the final week before expiration?
Just wondering.
You should be out of that hole soon.
 
Stanford,

Did you check out xtrenders? What do you think? I think Mitch Martin has posted over 250 points in gains since mid July by my records.
 
Hi guys. You are hard workers, and I can see you have progressed. I will need to read the post in more details as there is a lot of information in there (Particularly in Falconview's posts).

Some quick points:

1. Stanford: as falconview point it out, you make money in time spreads in part due to passage of time because the shorter time options loses value faster than the longer time one. You also make money if the stocks move towards your strike and/or if volatility rises, because in both cases the longer option will gain more than the shorter.

2. You place your strike where you think the stock will be on expiration of the shorter time option.

3. Falconview: Your time spread while being a time spread is not something I like because your longer time option is more than twice the premium of the shorter time one. The reason I do not like it is if the stock move away from the strike, the loss on the longer term option will be a multiple more than twice the premium of the short one. You may want to search for one on the QQQQs or sometime in next week's expiration when the time between the short and long date options will be smaller.

4. Falconview: I believe you are good at the direction assessment.

5. Falconview: I suggest that when you have a question, you post it in a separate post. If you have multiple questions, you can make multiple posts or use numbered points, as this helps in communication and in use of digestion and in references in responses.

5. Stanford: I think that Falconview is correct on his experience with markets from the past and is also correct on his assessment of others. I do not think that people's views here will affect their edge, but the nature of human might not let them share more freely if they think in terms of money only.

6. Falconview: one way I have with the bull spreads is that if the market turns down sharply, your one week options can become way more expensive. Did you consider playing the bull side using puts that are at least one month long? Selloffs can be nasty even in a bull leg.

I am sure I did not go over all the points, but I thought to write something rather than delay.

Best regards
 
Trading Journal and Stanford

a) To Stanford. The weeklies in the NDX work the same as in the OEX. I would like to point out to you that somewhere I read is that 75% of the stocks traded on the NY Stock Exchange are in the OEX 100 Blue Chips. Mainly because the institutions trade them. This means if you use the OEX graphs and charts as chart readers to keep track, you can use the same knowledge gained from the OEX charts to trade QQQQ, or NDX or SPX and other indexes. I do not even look at the NDX charts. Just trade the NDX based on what the OEX is doing.

b) Your point about the higher premium in the monthly responding in a reversal, costing me money in a horizontal TIME SPREAD is well taken. I had thought of that and the only solution I came up with was to make darned sure I got my TIMING right. ( grin! ) I have not looked at the QQQQ's but will do, if they might have lower premiums? I get the point though. The buy of the longer month, is solely as insurance to qualify for a small debit, in order to trade TIME DECAY in the other. Make it as small as possible. Though I sort of wondered about the effect of a directional play. I will see and absorb as it unfolds.


c) My wife told me on the news there was something about a HUGE splurge of CALLS in the market. Guess everybody identified the BULL TREND at the same time? ( laugh )


d) At the moment I am only comparing a simple BULL CALL Spread with the straight buying of CALLS for profits earned in a given number of OEX index points. I don't think I tried the other way of doing it by using a BULL PUT CREDIT SPREAD yet. I am leaning toward DEBIT spreads as safer than CREDIT spreads. I might lose in a BULL SPREAD, but my loss is minimal and fixed, and certainly nothing like the $20,000 I experienced in the CREDIT SPREAD due to such large MARGIN requirements. The profits, or return on capital is more too. Plus I can put on more trades, more frequently. I'm working on a strategy I'm developing. Have to wait and see how it works out and what nuances involved by trial and error. The only way I really learn. Thanks for the tip on the TIME SPREAD strategy ( I think ). ( time will tell )
 
Trading Journal

There is a lot of meat in this. I sort of think I catch the drift, but not sure? What advantage would the BULL PUT CREDIT SPREAD have over the BULL CALL SPREAD? In reference to what?

The TIME SPREAD is straight CALLS on both legs? Isn't it? What are you really suggesting here? A QQQQ monthly against what?
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6." Falconview: one way I have with the bull spreads is that if the market turns down sharply, your one week options can become way more expensive. Did you consider playing the bull side using puts that are at least one month long? Selloffs can be nasty even in a bull leg."
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I am sort of trying to grab SMOKE here, I think. I'm not sure what you are implying as a strategy. The balancing of value between the longer options and the shorter options is something I have thought about, but not rationalized yet. Only one trade on and pending, so lack the experience and data so far.
 
Quote from falconview:

Trading Journal and Stanford



b) Your point about the higher premium in the monthly responding in a reversal, costing me money in a horizontal TIME SPREAD is well taken. I had thought of that and the only solution I came up with was to make darned sure I got my TIMING right. ( grin! ) I have not looked at the QQQQ's but will do, if they might have lower premiums? I get the point though. The buy of the longer month, is solely as insurance to qualify for a small debit, in order to trade TIME DECAY in the other. Make it as small as possible. Though I sort of wondered about the effect of a directional play. I will see and absorb as it unfolds.
More...

When I mention QQQQ in the posts, I do not mean that you trade them. I mention them for illustrative purposes. In this case the illustration is even needed because in case of QQQQs you have the end of month options (The quarterlies). They expire on September 30. You also have October expiration.

Therefore if I were to buy the october, and sell the Sep. time-spread, I would have have an option that would cost roughly the double of the short option. It then lead to a balance.

With regard to your time spreads, if the market moves towards your strike, and if volty rises, you spread is better, because it benefits from both the price direction and volty rise. You can imagine that an opposite scenario leads to the opposite effect.

As you wrote, these things will be grasped over time by doing them. Time spreads are similar to straddles in relation to effect of stock price, but opposite in relation to volty. When volty was higher and heading lower, time spread were not good because the longer time option can get hurt due to a loss in volty.

PS: Tell your wife that her views on the market are very useful!
 
Quote from falconview:

Trading Journal

There is a lot of meat in this. I sort of think I catch the drift, but not sure? What advantage would the BULL PUT CREDIT SPREAD have over the BULL CALL SPREAD? In reference to what?

The TIME SPREAD is straight CALLS on both legs? Isn't it? What are you really suggesting here? A QQQQ monthly against what?
-----------------------------------------

6." Falconview: one way I have with the bull spreads is that if the market turns down sharply, your one week options can become way more expensive. Did you consider playing the bull side using puts that are at least one month long? Selloffs can be nasty even in a bull leg."
-----------------------------------------

I am sort of trying to grab SMOKE here, I think. I'm not sure what you are implying as a strategy. The balancing of value between the longer options and the shorter options is something I have thought about, but not rationalized yet. Only one trade on and pending, so lack the experience and data so far.
More...

1. Time spread: Do not be surprised and pay more attention to this point: time spreads do not matter whether you use calls or puts. Just use the same type of option for both months. Which one to use: use the call if the call is out of them money, and use the put if the put is out of the money. The decision in type spreads is which strikes and which months, not whether calls or puts.

2. Small vs. large premium: spreaders pick money from behind a streamroller, keeping a safe distance (short strike away from the current price), and making sure that the streamroller is heading away from them (trend). You are experienced enough to know that if the market sells off it can take the profits of two weeks in a matter of two days. If this happens, do you want to have sold a monthly spread or a weekly spread? That was my point. Notice that my point does arise in bear calls because the market does not "knive" traders on its way up without an alert and it does it in general with a rise that is not as fast as when it falls. In a rise in market the issue is more a straight line like recently. Call sellers must be hurt, but since you are a smart guy you already knew that the mood changed, and you switched to puts rather than calls.

I am now on the look out for the sharp selloff. It does not mean it will happen, but it can happen, and one has to be on guard.
 
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