OEX weekly options

One minute ago (9:13AM on today Friday), my models issued a short forecast of EUR/USD. EUR/USD is at 1.3465 at 9:13AM. There is correlation with stock market.

Falconview: Could you check EUR/USD on your models? You can also see the action on EUR/USD.
 
Trading Journal

Just checked your Euro and it is marking a top.
The USD is not yet.

My OEX is not quite there yet, but getting closer.

I have just completed getting out of the three CALL DEB IT SPREADS.

What I learned was it takes 3 OEX points in a move to Break Even. Presumably then I can make a profit on short moves of 4 to 5 OEX points. Which is information I wanted to know. It is good information as well.

The first DEBIT spread a regular type one strike apart, at 520/525 which I had legged the sold into, by letting it ride 2 points closer before selling the lower side, showed a profit first It made a GROSS of $100 and cost $35 round turn for 5 contracts. So ended up with + $65 net profit.

The second Debit spread made .10 cents or $50 gross and cost me $35 in commissions for a net profit of + $15
This one had been 3 strikes apart.

The third DEBIT Spread broke even. This one started with the high side In The Money. Which was probably a mistake. However I lost the commissions which were - $35 The spread was 3 strikes apart.
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LESSONS LEARNED

1 ) What I learned from this experimental exercise is that it doesn't matter if it is one strike apart, or three strikes apart.

2) The Break even on a regular spread, with no changes is 3 OEX point movement is needed. It is a mistake to buy the one side ITM. I think the OEX was too close to the strike or something when I put it on.

3) It is better to LEG into the SOLD side of the leg and get a narrower SPREAD under $2. You get your profit faster. All things being equal I assume you would make more money for the same size move of the index this way.
 
I've been playing with different time frames. Trying to locate something that would tell me the day before there is going to be a GAP the next morning and which direction. Nothing much there. The S & P minis chart told me it was going to gap at 5:30 a.m. before the market opened. But useless to implement a trade with that information. You need the idea before market closes the day before.

Still working on that point.
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Got to go and buy some cement for my contractor. I'm out of the three debit spreads, didn't make much, but did learn a lot of very useful lessons for next time around.

Be back around NOON to check that my CREDIT SPREAD is still expiring nicely collecting TIME DECAY.

The major thing was I learned how to actually trade a DEBIT spread VERTICAL this past week.

The major point being that it will make some small money on a short move. Not sure I would want to counter trend trade it. I see KEVIN is more into day trading. I don't like anything so fast and want a few days for trades to work. Intra-day stuff is not for me.
The other thing it is useful for small poverty stricken retail traders and you can start with $5 to $6000 dollars. It does not need a big bank like CREDIT SPREADS. Or have the high risks, presuming you can read market trends.
 
Trading Journal

You got a forecast for Monday? 1 1/2 hr to go this weekly expiration Friday. I'm wondering what trades if any to set up for Monday?

I still have the trend UP. Wouldn't be surprised to see another 5 points in the OEX upward on Monday and Tuesday, as it stands right now.

I'll be out of the market by 4 p.m. Does'nt look like I can put anything on through the weekend?

C'est la vie!
 
Stanford:

1. Their spreads are about $2 wide, which if you project to the QQQQ value, is bout 4%. The leverage is therefore 25. Why is this important? Because if you adjust to leverage, the return is only 0.65% per trade. If you project it for the whole year, and assuming always a trade is on, you get about 3 to 4% annualized. The leverage adjusted return is even lower. Why: check points 2-4.

2. What is shown is arithmetic average of the return, not the geometric average , which is the true return. Geometric return is always less than arithmetic, and if you add the no trade time periods, your return is much less that 3%.

3. Other problems: you have to divide by another factor (which is higher than 1), because the beta of the QQQQ is higher than the beta of the market.

4. No dividend is in there, while you receive it in the QQQQs.

Conclusion, the leverage/risk/dividend adjusted return is probably around 1.5%.

The key is to have a positive no risk return, and then leverage it, not to get a good looking return using leverage which can deceive the eye.

Did you get a chance to call your brokers?
 
Stanford

I looked at your website. I'm thinking I can do better than that?

I noticed the commissions were not deducted. These were Gross amounts.

I was interested in your comment about small manipulation of the credit spreads in trades. I didn't find anything though. Their trades were long, 42 days and the shortest 19 days. I like to work my money more often than that.

Still it was interesting reading for a read and would have like to actually see the credit spread trading system. But I'm not going to pay for it.

TJ kind of confused me with his technical talk. I didn't understand the nitty gritty of his explanation, but sounded right on, whatever he meant.:D

Looks like my weekly credit spread trade did good this week. Some weeks are smaller returns than others. I got in a completed IRON CONDOR which boosts the overall return on capital percentage.
Credit spread return this week totaled: (+ $930 net return), or .037% on margin, or capital invested for the week. Should have done more contracts, but resisted the temptation.

The debit spreads all three of them actually made a very little money, totaled together. Not much, but the lessons learned were invaluable. I know now how I'm going to trade this strategy and how in this strategy. Probably some fine tuning to do with it though.

I've got one more strategy to try and then I will have a look at Kevin's method of doing the TIME HORIZONTAL spread. Probably two weeks away. There may be some way to manipulate that to make it work profitably, come what may?

For now, I've got two working trading strategies now. I'd say I'm pleased with this week results.
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Quote from falconview:



TJ kind of confused me with his technical talk. I didn't understand the nitty gritty of his explanation, but sounded right on, whatever he meant.:D

More...

Another way to look at it is to look at the worst trade (on record). The worse is actually you lose the whole thing.

If the worse trade was MINUS 50%, and since one should never allow a loss of more than 2% of their bankroll on one trade, this project to never invest more than 1/25th of your bankroll in one of these spreads. So the return projected back to bankroll should be divided by 25. And 1/25 of 16% is around the number in my previous post.

Why 2% limit on loss?

I explained these things to Stanford in a PM in relation to another topic. I hope he did not view me as pessimistic guy.

Stanford: we care, and we want you to win. But to win, we want you not to lose in an accident along your road to finance independence.:)
 
TJ and falconview. Believe me, I appreciate the way you look at things because it gives me a whole new approach to develop.

Have not talked to the broker yet.

Have you done any dividend arbitrage?

Thanks Michael
 
Quote from Stanford:

TJ and falconview. Believe me, I appreciate the way you look at things because it gives me a whole new approach to develop.

Have not talked to the broker yet.

Have you done any dividend arbitrage?

Thanks Michael
More...

I know how the dividend arbitrage can be played, but probably not in the way you may be reading about it in the web. All I have come across on the net so far is not correct in this area.

I cannot say how I would do it because it is an edge. You however need capital for these things to make the return in dollars worth your time and efforts.

If you have come across a dividend arb idea, post it here, and the wolf packs around here should be able to cut it in pieces if it is wrong. However if it is good, you would probably hear a loud silence.
 
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