Options trading for a living

Quote from oldnemesis:

Quoting TSLEXI:
The October 13 CVX 110 put is trading at $0.28, and the 115 put is trading at $0.57. My max profit is $29/contract, and my max loss is $500/contract, for a ROI of 5.8%.
As long as CVX doesn't drop below $114.71 (currently it's trading at $118.13) by expiration Friday, I stand to make a profit.


CVX:

Oct 115/110 bull put spread for a net credit of $29.
Yield = 29/471 = 6.16%
Prob = 79%
Expectation = .79(29) - .02(471) - .19(236) = 22.91 - 9.42 - 44.84 = -31.35

This is a bad trade. The downside probability times the downside loss is much greater than the win amount times its probability. (the extra term is to account for the possibility of CVX ending the trade between the strikes)

i.e. the trade has a negative expectation. You would need twice the yield to get a positive expectation.

All the rest is just hot air.
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So, what would you recommend?

The 120 put is trading at $2.42, and the 115 put is asking $0.66.

So the max profit for a 120/115 bull put spread is $176/ contract, while the max risk is $500/contract. That gives a yield of 54.3%, and the breakeven point is $118.24.

Would this trade have positive expectation, as the yield is a little more than 8x higher?
 
Quote from Squilly_D:

R/R > 1. It is impossible for credit spreads to have a R/R > 1. But I do like the statistical edge they provide on top of event driven entry points I trade off of. Yet again, I just think we are similar just on two different sides of the isle. If you’re winning trades and money, everything should be fine!
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AAPL 470/480 call spread. All durations are >1. Virtually any spread slightly ITM. There are literally millions of spreads on listed share options that satisfy that criteria. I am not comfortable being the patsy. Eat like a mouse and shit like a dinosaur.

I like tautologies so I'll leave assuming that absent knowledge you're going to "do what you're going to do"
 
My max profit is $29/contract, and my max loss is $500/contract
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In other words you are willing to risk $500 just to earn the price of 2 packs of cigarettes.
 
I wonder...is there any spread screener that can look for bull put spreads where the net credit exceeds the difference in strikes? Then it'll make a riskless profit.

I am a newbie at options trading. I've been a buy and hold for income gal for years.
 
Quote from xelite777:

In other words you are willing to risk $500 just to earn the price of 2 packs of cigarettes.
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Where on earth do you live where ciggies cost $14.50/pack?!

And yeah, Squillie informed me that trade was stupid. The new one has a much lower risk/reward.
 
Quote from drownpruf:

AAPL 470/480 call spread. All durations are >1. Virtually any spread slightly ITM. There are literally millions of spreads on listed share options that satisfy that criteria. I am not comfortable being the patsy. Eat like a mouse and shit like a dinosaur.

I like tautologies so I'll leave assuming that absent knowledge you're going to "do what you're going to do"
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Oops, my bad, I mint to say that OTM credit spreads have a R/R<1. Anyway, I will continue trade the way that I've learned due to the fact that it is working for me. I'm not knocking your method or saying that my way is the only way. That's all.
 
Quote from Squilly_D:

Oops, my bad, I mint to say that OTM credit spreads have a R/R<1. Anyway, I will continue trade the way that I've learned due to the fact that it is working for me. I'm not knocking your method or saying that my way is the only way. That's all.
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Can you show some credit spreads where the risk reward is less than 1.
 
Quote from TSLexi:

Should I look at the vol smile, and write the puts that have the highest IV, and short the shares to hedge?
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Ya, I stated that about three pages ago.
 
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