What a pro!
OPtionshouse closed my expiring position without my consent
- Thread starter bthale
- Start date
What a pro!
With this kind of volatility, I would sleep very well even with 40X leverage on the SPY. Volatility is dead.
Let us know when you find a US broker offering 40x. And why are you advertising your blog in your profile?
Read my post, I never said I know a broker that let's you leverage 40x. It is just not as dangerous as people think because the volatility in SPY is so minimal these days. Yes it is dangerous, but much less dangerous than using all your margin to buy or sell crude oil futures contracts, for example.
What some small time futures brokers lets traders do with their shoestring intraday margin requirements, like $500 ES or CL intraday margins, is much more relevant and dangerous to the traders here, than any SPY credit or debit spread where only one leg is exercised.
Probably a whole lot better than the broker's margin department and compliance department would be sleeping that night.
It was a Credit Spread, Options 101. The trade must have been profitable. My guess the reward:risk ratio was about 1:20. Credit $600, $12,000 risk.
We might call this a "niederhoffer" spread (or "bent over spread" in options slang) with two legs. I don't know who gets the credit for it but it wouldn't be me!
Is it related also to the "La Guardia Spread?"
You put on crazy risk and if it works out, great.
If you lose millions, you head to a nice little country with a new ident...
You put on crazy risk and if it works out, great.
If you lose millions, you head to a nice little country with a new ident...
After speaking with OptionsHouse this morning, I finally understand what was going on. Indeed, I could have been on the hook for a boatload of money.
My confusion was due to the fact there are two settlement types, cash and physical. SPY is physical settlement meaning I take possession of the ETF shares if assigned, whereas cash settlement would be just that. No stock ETF shares would change hands. SPX is cash settlement and with SPX, the loss is truly limited by the spread.
I have been trading SPX and RUT for the last three years and only tried the SPY in the past month, so I was not familiar with the physical settlement methods.
So a good lesson learned, and I shall go back to cash settlement indexes for my credit spreads.
As for the critics here of my method of trading, understand that credit spreads aren't for everyone. Risk reward is upside down, but risk reward ratio of 5% to 95% also equates to 95% success rate. And when you learn to manage the losers to limit your loses, you have a system with a nice little side income.
Happy trading everyone! (except maybe drownpruf)
My confusion was due to the fact there are two settlement types, cash and physical. SPY is physical settlement meaning I take possession of the ETF shares if assigned, whereas cash settlement would be just that. No stock ETF shares would change hands. SPX is cash settlement and with SPX, the loss is truly limited by the spread.
I have been trading SPX and RUT for the last three years and only tried the SPY in the past month, so I was not familiar with the physical settlement methods.
So a good lesson learned, and I shall go back to cash settlement indexes for my credit spreads.
As for the critics here of my method of trading, understand that credit spreads aren't for everyone. Risk reward is upside down, but risk reward ratio of 5% to 95% also equates to 95% success rate. And when you learn to manage the losers to limit your loses, you have a system with a nice little side income.
Happy trading everyone! (except maybe drownpruf)
Everyone and his dog knows about credit spreads. Managing losers is easier said than done when it comes to after market gaps or unexpected news.