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sanity check
- Thread starter bluesdave
- Start date
The problem with delta (directional) option plays is two-fold.
1. Adjusting for Theta (or premium)
2. Delta risk.
Spreads can mitigate some of those pit-falls, but it is not just trading a spread, but the right spread.
Buying a call-spread with short premium ("juice") is easily done. Many will be scratching their head when you say buying a call spread for with short-premium. What you are doing is buying a slightly in-the-money (ITM) call and selling the at-the-money (ATM) or out-of-the-money (OTM) call.
The trick is finding one that gives you the largest amount of short-premium.
This gives you a down-side buffer and also positive theta.
If you start looking at options as long/short net premium values, rather than net values - it will help in your decision making.
The strategy is analogous to a collar or (covered call with protective put).
Pretty soon - you begin to realize that calls and puts are the exact same thing. It's all about gamma and curvature.
for what its worth....
1. Adjusting for Theta (or premium)
2. Delta risk.
Spreads can mitigate some of those pit-falls, but it is not just trading a spread, but the right spread.
Buying a call-spread with short premium ("juice") is easily done. Many will be scratching their head when you say buying a call spread for with short-premium. What you are doing is buying a slightly in-the-money (ITM) call and selling the at-the-money (ATM) or out-of-the-money (OTM) call.
The trick is finding one that gives you the largest amount of short-premium.
This gives you a down-side buffer and also positive theta.
If you start looking at options as long/short net premium values, rather than net values - it will help in your decision making.
The strategy is analogous to a collar or (covered call with protective put).
Pretty soon - you begin to realize that calls and puts are the exact same thing. It's all about gamma and curvature.
for what its worth....
Quote from spindr0:
SANITY CHECK ?
The title of this month's issue of MONEY magazine is "The 20 Best Money Websites... and the one's you should avoid." I quote, "Don't take investing advice from Yahoo Finance message boards."
ROFL
Great point, however it is also a good place to share ideas.
I certainly wouldn't come here to get stock tips....
Advice and information are not always one in the same.
While I might not agree with you, I can buy your argument on what you consider an uptrend... It is not just a single dumb indicator, bt some thought and guess. Fair enough....
Christian
Christian
Quote from Catalite:
Quote from christianhgross:
Clear uptrend? Now that is asking for trouble. There is no such thing as a clear uptrend. You see a clear uptrend after the fact...
People trade in many ways, and my preference is directional trend trading. Since that's my focus, I've become pretty good at figuring out when we are in a trending phase. To figure out the likely direction of a 1-2 month move before it happens, I like a combination of Investors Intelligence Bull/Bear survey, the RSI 14-day and 14 day stochastic on the $SPX, the average five day range of the NYSE $TICK, and the chart look and quantity of CANSLIM stocks in the market. Combine this with short term timing in the market (using $SPX for RSI-5day, $NYAD, $NYUD, $TRIN extremes, and $NYMO), you can buy pull backs in individual securities (like 3-7%) to go long calls, and you have an effective trading system.
What is your system?