So I don't use stops and I think the math supports this.

It was more to illusrate debit spreads vs credit spreads, same strike,expiry..not suggesting you put on boxes to earn the risk free rate of return

wxytrader said:
I'll look into it. I don't think my broker allows boxing options strategies if thats the same.

  • The profit earned is really very low and minimal.
  • The strategy is only helpful for experienced investors and not retail investors, where a lot of knowledge is required to take such a call.
  • The margin required to apply this strategy requires a huge margin and maintenance of it which small traders will find it tough to maintain.
This wouldn't work for me. I would prefer lose big to win big versus lose small to win small.
More...
 
taowave said:
It was more to illustrate debit spreads vs credit spreads, same strike,expiry..not suggesting you put on boxes to earn the risk free rate of return
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Over the long run, the math would suggest they are about even for profits once you factor in the risk reward I assume. I'm talking about cash settled options, no risk of assignment.
 
wxytrader said:
This is on a defined risk spread. I find my profit target and let the trade just run out.
My reasoning is if my profit target is hit then I make maximum profits.
If it isn't then I let the option expire worthless.
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This is the very definition of using a stop.
 
wxytrader said:
T


Technically I am back-testing because I have sized way down. Currently after some mis-management I am down 640 USD last week. Had I exited during the volatility spike, I would have been up 250 USD. Had I not tinkered with it by adding a credit spread in the other direction then I would only be down my max risk of $160 or whatever. Had I closed the credit spread 10 minutes after opening it I would have profited about $100 on it, instead I suffered a max loss. I am beginning to notice with credit spreads they will hit 12 deltas almost 100% of the time on the call and put side...so forget about iron condors being a viable strategy for anything other than cash settled options imo.

So in summary I could have made a maximum of 350 USD, but instead I suffered a maximum loss of 640 USD.

Had I done nothing like I planned I would have suffered only a $160 loss. I also don't close positions itm or otm to avoid fees. It usually works out cheaper to let them expire worthless. So again, doing NOTHING is the best strategy thus far. Ideally I will set up profit taking conditional orders based on the underlying price...that way I can really do NOTHING. As it is I am sitting there making decisions intraday which is the trading equivalent of watching the 3 stooges do a slapstick routine...

Side note: So from the anlayzer tool and my spreadsheets, ITM spreads, with the same underlying price seem return increasing profits the closer they get to expiration?
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Ah-Oh
 
wxytrader said:
Side note: So from the anlayzer tool and my spreadsheets, ITM spreads, with the same underlying price seem return increasing profits the closer they get to expiration?
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Do you really mean true spreads, or mabe some other constructs?
IMO with 2-leg spreads one side loses while the other side wins.
Just show such a setup you mean in this options tool.
 
taowave said:
Before you get too crazy with debot spead vs credit spread,are you familair with " box arbitrage"??
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earth_imperator said:
Do you really mean true spreads, or mabe some other constructs?
IMO with 2-leg spreads one side loses while the other side wins.
Just show such a setup you mean in this options tool.
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https://optioncreator.com/stwcjtb

buy 1 spx 20-Sep-2024 $45 call $40.10
sell 1 spx 20-Sep-2024 $46 call $40.06
buy 1 spx 20-Sep-2024 $46 put $21.31
sell 1 spx 20-Sep-2024 $45 put $21.03

Total cost: $32
Proceeds at expiry (1 year): $68

So at the end of the year I am making 68-32=$36???
What am I missing here?
 
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wxytrader said:
https://optioncreator.com/stwcjtb

buy 1 spx 20-Sep-2023 $45 call $40.10
sell 1 spx 20-Sep-2023 $46 call $40.06
buy 1 spx 20-Sep-2023 $46 put $21.31
sell 1 spx 20-Sep-2023 $45 put $21.03

Total cost: $32
Proceeds at expiry (1 year): $68

So at the end of the year I am making 68-32=$36???
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You make $68 profit per contract according to this tool, but in reality it's a little bit complicated: you have to calc it yourself from your margin requirements etc. It depends also on whether your account is a margin acct or a cash acct.
Ie. you will get $68 at the end, but how much profit this makes, you have to calc yourself.

So, your construct is either a Short Butterfly or a Short Condor, I think, consisting of a Call Spread and a Put Spread.
But it's in reality an arbitrage trade :), if the data is correct.

Btw, above you have a typo: I guess you mean "Sep 2024" Fixed

What am I missing here?
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Dunno what else you mean or expect. Elaborate pls.

Btw, you better should enter (change) also the "Current Stock Price", and better set the risk-freerate to 0, IMO. Then the Volatilities will be "corrected" by the program...
ATTN: there are 2 such "Risk-free Rate" fields... see further down...
 
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