l read moneyshow.com about how to profit from theta when trading options, http://www.moneyshow.com/trading/Options_Idea.asp?aid=optionsidea-20487&iid=OptionsIdea&page=2#
and found it of great interest.
l have just subscribed to the newsletter , options trading signals. yes you guessed it, l trade (some call it gambling!) options. l also profit from theta decay, since l mainly do credit spreads, l feel the main greek l look at, delta , has a much more significant role in an option's value.
l am currently in the bull put credit spread in SPY, sold the 103put 102put, entered yesterday ,23rd Monday for a measly 0.05cent. well l could get around double that now, SPY is currently 105.78, in the article a contingent order is entered immediately after setting up the credit spread in SPX, l rarely set up a contingent order, but if l were to set a contingent order to buy back, from yesterday's close, looking at it now130pm ET, l would probably set it at 105.45 just below the 61.8% fib retracement line on both the daily and weekly, where would an experienced trader set it and why? with SPY at 105.78 the cost of buying back my 103put 102put spread would cost me 0.15, thats a 100%loss before commissions! the cost would be even greater if it was at 105.45. in the example in the article, the risk to profit ratio is quite favourable in comparison, $1000 loss : $750 gain, do the index options give a more favourable risk to reward ratio? or is it a case of setting up a contingent order closer to the current price?
l could also set up a ratio put back spread by buying another 102put, incase, it does collapse. l would get out of this position, before expiration, this Fri 27th
thanks in advance, looking forward to your reply
Nixon
and found it of great interest.
l have just subscribed to the newsletter , options trading signals. yes you guessed it, l trade (some call it gambling!) options. l also profit from theta decay, since l mainly do credit spreads, l feel the main greek l look at, delta , has a much more significant role in an option's value.
l am currently in the bull put credit spread in SPY, sold the 103put 102put, entered yesterday ,23rd Monday for a measly 0.05cent. well l could get around double that now, SPY is currently 105.78, in the article a contingent order is entered immediately after setting up the credit spread in SPX, l rarely set up a contingent order, but if l were to set a contingent order to buy back, from yesterday's close, looking at it now130pm ET, l would probably set it at 105.45 just below the 61.8% fib retracement line on both the daily and weekly, where would an experienced trader set it and why? with SPY at 105.78 the cost of buying back my 103put 102put spread would cost me 0.15, thats a 100%loss before commissions! the cost would be even greater if it was at 105.45. in the example in the article, the risk to profit ratio is quite favourable in comparison, $1000 loss : $750 gain, do the index options give a more favourable risk to reward ratio? or is it a case of setting up a contingent order closer to the current price?
l could also set up a ratio put back spread by buying another 102put, incase, it does collapse. l would get out of this position, before expiration, this Fri 27th
thanks in advance, looking forward to your reply
Nixon