Option income strategies

[akivak]

Quote from traderlux:

akivak,
I appreciate the info you have provided. I have also used some of these sites and found them valuable. Also a lot of them have free info that they share, or you can subscribe for short or trial periods.
I am now mainly doing BPS on SPY. Still concerned about down-side risk, have been trying out just using a combo of VIX calls and QQQQ puts as a protection plan.

I found out that SPY is too commissions consuming. Which broker are you using and how much are you paying commissions?
Why you hedge SPY with QQQQ?

I completely agree regarding valuable info. For example, there is a very interesting discussion "What's better 90% or 70% Probability Index Iron Condor and Credit Spreads Options?"
http://www.monthlycashthruoptions.com/90PercentVs70Web.htm

 

[jones247]

No, I'm saying sell 5 550 puts, buy 10 450 puts. If you want to buy the 10 450 puts at no charge, it may be worth doing a backspread. With the backspread the put leg trades would be as follows: sell 5 550 puts, sell 3 450 puts, buy 10 430 puts.

Walt

Quote from akivak:

I'm not sure I follow you.
You mean instead of for example sell 5 550 puts, buy 5 540 puts, you suggest buying 10 540 puts?
I'm afraid the cost of 5 additional puts would be more than the credit I receive for the whole IC. Or you mean going further OTM?

 

[akivak]

Quote from jones247:

No, I'm saying sell 5 550 puts, buy 10 450 puts. If you want to buy the 10 450 puts at no charge, it may be worth doing a backspread. With the backspread the put leg trades would be as follows: sell 5 550 puts, sell 3 450 puts, buy 10 430 puts.

Walt

But in this case my margin requirement increases 10 times and my risk increases 10 times as well. It's almost like selling naked, and it protects only against catastrophic fall.

 

[traderlux]

Quote from akivak:

I found out that SPY is too commissions consuming. Which broker are you using and how much are you paying commissions?
Why you hedge SPY with QQQQ?

I completely agree regarding valuable info. For example, there is a very interesting discussion "What's better 90% or 70% Probability Index Iron Condor and Credit Spreads Options?"
http://www.monthlycashthruoptions.com/90PercentVs70Web.htm

As some guys on other threads have said, and I put together, I am a simple, cheap guy. I dont want to do anything complicated or expensive.

I trade SPY because I have a better understanding of it than the futures options and their euro-type option expiry. Just my quirk.

Commisions are a greater %, but I am willing to pay it as a cost of doing what I have a comfort level with. I trade with either O'house or O'xpress. Again, I like the platforms and will pay the price.

I am testing a hedge plan with QQQQ puts and VIX calls. QQQQ usually leads market moves up or down, and also the moves are usually magnified compared to SPY.

I am just tradng BPS instead of full ICs because my current market outlook is bullish and I dont want to trade against that, which is what the other side, bear call spread, would be. My main rule in trading is to trade with the market.

I look for a support level and place the BPS below it. I trade front month and usually enter wk after OPX wk, or any time after. Spreads are either $1 or $2 wide.

My plan allows for additional entries of the same spread or a different one.


I plan to get out OPX wk, usually by Tue. Another commision, but it is in my plan. I will hold to expiry if I think I am far enough OTM at the time.

My loss exit is to get out if the spread goes over 2X the original price (my original credit). Adjustments?, dont like to do them. I try to have a solid plan going in, and if things change, I just want to get out and move on. Anything I cant write out or draw on the back of an envelope, I figure is too complicated.

 

[simplyloge]

Perhaps you can search for the "optioncoach " thread...spx credit trader ................perhaps one of the best on ET.....this will be of great benefit to you..........

 

[spindr0]

Quote from akivak:

But in this case my margin requirement increases 10 times and my risk increases 10 times as well. It's almost like selling naked, and it protects only against catastrophic fall.

Increasing your risk 10 to 15 times as much is a smal price to pay for doubling your profit!

 

[spindr0]

Quote from traderlux:

I am testing a hedge plan with QQQQ puts and VIX calls. QQQQ usually leads market moves up or down, and also the moves are usually magnified compared to SPY.

While I don't know the precise details, a friend of mine trades a NAZ vs. SPX positional system (usually not intraday).

He determines the alphas of a number of sectors and uses them to determine whether the buying (or selling) strength is going into the NAZ which is more tech laden or the SPX which is more consumer oriented. He then takes a ratioed pairs position depending on the perceived strength of each.

I've seen the long term performance and it's pretty dramatic. Unfortunately, occasionally there's a drawdown a bit too large for my comfort. If I had the time an inclination, I'd look to see if options could manage that aspect better.

 

[jones247]

You're right... however, "selling [almost] naked" and being protected against catastrophic fall works in most market conditions IF one is able to make TIMELY ADJUSTMENTS as needed. The proper timing of th adjustments is what will make or break this strategy... Regardless of the strategy, there is always the dynamics of risk/reward and expectancy/probability in play...

Walt

Quote from akivak:

But in this case my margin requirement increases 10 times and my risk increases 10 times as well. It's almost like selling naked, and it protects only against catastrophic fall.

 

[akivak]

Quote from jones247:

You're right... however, "selling [almost] naked" and being protected against catastrophic fall works in most market conditions IF one is able to make TIMELY ADJUSTMENTS as needed. The proper timing of th adjustments is what will make or break this strategy... Regardless of the strategy, there is always the dynamics of risk/reward and expectancy/probability in play...

Walt

With this strategy, there is always a dilemma:
Going too far OOM (450 in this case) doesn't give you practical protection - it's too far. Going too close - the cost is too high to buy x2 put than the number you sell.

 

[Pinokio]

If some of you are convinced that your strategy is working well than why you argue with other people that are not agree with that? If they finally find your strategy good they will use it and will not tell you thank you my friend. So use your strategy and make money for your self.
Maybe it is selfish but is like this.

So, this time I will not be selfish and I give you one interesting link which is free of charge: http://www.avasaram.com/index.jsp