You might look at chains farther out ... short term expiry months you need to take smaller gains when you get them. Theta and volatility are killing you.
Question on directional trades
- Thread starter whenim64
- Start date
You really need to chill. We get it -- you don't like spreads. What works for you and what makes sense for you doesn't necessarily match other perspectives. Saying the short option isn't "worth it" essentially says that everyone has the same risk/reward tolerance, and that's just not true.
Depending on the situation, I sometimes leg into spreads. Go long with a call as a proxy for long the underlying, ride it until I feel the trade has run out of steam, and then sell a short call against it. This ekes out more premium and reduces (or eliminates) downside risk. Maybe not a "traditional" spread per se, but the final position works for me. It might not work for you. So be it.
Verticals/debit spreads are useless. The short option isn't worth the premium you receive.
Check it out sometime - compare a debit spread position to a similar long only position and track the performance of both. In terms of risk AND return the long position will be better 90% of the time.
Your kidding right? 90% of the time, really? How about compare a debit spread to a long position and then model it out to expiration and tell me what the risk and return look like.
Dolemite ..... Post a debit spread of your choice and I will post an equivalent position using only the long option. We then can watch the progress of both positions in terms of risk and reward.
The long option I would pick would either be the same strike as your debit spread or 1-strike further OTM.
You can compare the two positions in your head, you don't need to model it out. Debit spread has limited profit and defined risk, the long position has unlimited profit and defined risk.
Looking forward to your reply and I hope you or anybody takes me up on my challenge and posts a debit spread.
Looking forward to your reply and I hope you or anybody takes me up on my challenge and posts a debit spread.
Well you won't get any arguments from me. I need somebody to buy the options I am selling.
You can compare the two positions in your head, you don't need to model it out. Debit spread has limited profit and defined risk, the long position has unlimited profit and defined risk.
Looking forward to your reply and I hope you or anybody takes me up on my challenge and posts a debit spread.
Maybe I am confused with what you are saying. Let's say I buy a vertical with the long atm and the short otm, and you buy either an atm or otm option. Once we size them up so the risk is similar are you saying that the return on the long if the market doesn't make a move will be more profitable? If you are arguing that the profit profile has the "potential" to be greater than we agree. But more "probable"?
No need for the song and dance, just post a debit spread of your choice and we can compare the two positions as they progress. That should clear up any confusion.
- Trade 1: Debit Spread
- versus
- Trade 2: Long position only
No need for the song and dance, just post a debit spread of your choice and we can compare the two positions as they progress. That should clear up any confusion.
- Trade 1: Debit Spread
- versus
- Trade 2: Long position only
Let's make it Friday expiration, no sense in dragging it out.
SPX buy 1950 sell 1955 call for 1.40
SPX buy 1950 call for 2.8
One reason I like spreads over pure longs is expectancy. Obviously if I get a straight-line move calls or puts will beat spreads. In the real world itâs the zigs and zags that kill that kill positions. With verticals you can withstand some counter moves and still be alive. I find spreads (sometime even directional flys) allow me to maintain positive expectancy over more trades than outright long or short. No one trade will settle the dispute. Maybe a few hundred would help one to decide.