Got my ink in the printer and have printed out both OEX and NDX.
From looking at it, they are the same chart, except they have different numbers on the side, expressing different ways of showing percentage gain. You could probably trade either one off the other signals?
Did some analysis of both charts. Starting with the OPEN day of the Monday of the option month.
It is certainly clear, you have to pick the turning point for the month, to place a vertical Credit Spread outside, or above or below a resistance or support horizontal line and identifying that turning point is the problem.
Interestingly enough the NDX didn't really give good premiums any more than I thought it would going out. 100 points using the weekend BIG CHARTS option chains only gave you .15 cents in the spread for a 100 points away from the action.
To get $1.20 in credit, the 1905 calls had to be sold. The resistance top was at 1900 thereabouts. That is VERY CLOSE and makes it imperative that one had a good turning signal in the trend.
In the OEX it was a little better. The 515 strike above the 510 STRIKE which is the resistance horizontal line gave + .85 cents and if I remember rightly we are trying to get a $1.20 as a trade. To get the $1.20 you would have to sell the 510 STRIKE in CALLS as the resistance line overhead for a bear move. Since the trend has at least momentarily turned down, the 510 looks like a good bet. The prices were better in the OEX.
Since the charts are the same, more or less, in the NDX and the OEX, guessing what is going to happen later this option month - 3 weeks left is kind of iffy? In order to get $1.20 it sure looks like you have to pick a trend turning point for the option month. For this month, the signals are still mixed and I would not trade yet.
I generally use the BIG CHARTS computer indicators and my favorites are DMI and Volatility Fast and RSI for the weekly. For analysis purposes on a monthly basis I tried the others and selected MOMENTUM, ULTIMATE OSCILLATOR and Fast Stochastic. The idea to identify the trend change, for the whole month. Chart patterns show a FLAG forming and a breakout should be to the upside sometime. But within the month? Don't know? Would sit and wait I guess?
Going back to the previous option month the trend change and the entry for a Vertical Credit Spread was more clear cut. You could follow the daily bars down with a trend line, or any of the three mentioned indicators. The momentum in this case gave the clearest signal we had changed trend about ten days into the action for the option month. One of the problems with computer indicators is that they are lagging indicators and usually the last three days will adjust themselves as each day progresses. Still you can get a signal if you are familiar with charts and daily bars. Higher lows was the signal in this case.
The month before; that END OF MAY week to third Friday of June was a tricky forecasting month apparently. In the NDX if you took the first signal as a trend change ENTRY, you would have sold CALLS in a VERTICAL which would have gone bad on you, depending on what premium you had chosen at the time. It ended at Expiration slightly more than wanted. On the other hand if you had taken the second trend change signal in the month, violation of trend line, or higher low, you would have done well with Vertical PUTS.
Admittedly this is only a 3 month study. Phil probably has some adjustment that he could use to get out of the first spread toward expiration week, when beginning to be threatened. Not sure how that would work, he might please explain that? In the OEX you would have won by the skin of your teeth, but in the NDX you would have got penetrated into your spread.
The bear plunge before that Month, I did well and managed to get in two or three trades, forget now, but it was a nice trend, using horizontal resistance lines over the pullbacks as the bear fell. Just placing the Vertical CALL spreads above those resistance lines. Used a trend line to keep trading going down.
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In response to those 2 or 3 fellows on here, that insist I become familiar with GREEKS, I'm going to give it a whirl this coming week. I do know DELTA and THETA, but not familiar with GAMMA, or the other one. Nor am I familiar with how to use them? In a credit spread I know I collect premium called THETA and most of it is in the last week of the month and in particular the last two days of expiration week.
My problem mentally with GREEKS, I have no reference point. The numbers for the GREEKS change hourly with the index movement. So what does that tell me? Nothng apparently? I can more forecast using the index and daily, or hourly bar charts? I'm presuming from the comments of people trading GREEKS that there is some sort of variable sliding change in the numbers that tell you, or forecast for you, what is GOING TO HAPPEN? I'd guess you would have to compare the four GREEKS one to the other as they constantly change and somewhere in that, one changing more than another would probably forecast, or tell some kind of story?
From what little I've read on this FORUM, the market makers constantly adjust their positions using GREEKS, which is intriguing. Haven't a clue though, nor am I sure it is relevant to a retail trader? There are also some Delta Neutral strategies I've read about, but haven't really yet found any application in learning CREDIT SPREADS yet. They may work for other types of spread trading? Anyway, I'm going to this week, keep a running record of the changes of the four GREEKS and see what they tell me in relationship to changing index prices and movement and premiums. Maybe I can get something out of them?
***********************
I might just touch on another point, as a novice in credit spread trading study, is the matter of the goal of a trader in credit spreads. People have different expectations and one person might want to earn $30,000 net profit for the year, another $50,000 and another $100,000 or $250,000. I believe Phil is in the latter category from things he has said? Myself, my goal is $100,000 net profit before income taxes. Otherwise I'm seriously going to think otherwise. Phil has often mentioned 20% is a good return on capital at the end of a year and he is trading professionally. Considering CD's in banks are returning near zero and inflation is running 6% to 7% it behooves one to find another way of getting better returns. In the Market Wizards book, the last one a friend donated to me, when he came to visit me in the Belize Alps. Linda Raschke is touted as a Market Wizard earning about 40% on capital a year. She was at that time, doing a system of long betting, with heavy drawdowns. She has since grouped with some other traders to handle other peoples money. That tells a story of itself, if you read between the lines. There are a number of systems with drawdowns as part of the system. The attraction for me in CREDIT SPREADS is if you get it right, you can, or should be able to get it down to almost 100% correct and several people are claiming they have done so from 2 years to 4 years. You never know whether to believe them, but it seems sort of possible? That's what I'm trying to find out. I don't know your goal in this? Everybody is different with different needs.
Which brings up another point from back in the 1980's when I used to trade stocks. Back then the system reviewers would not credit anybody's claims that did not have provable audited accounts, for a minimum of three years. Which seems a good standard. So whatever percentage on capital you can show for a year is basically the rule of thumb, on whether a particular system, or advice is any good. I don't know what the deal is these days? I've just jumped back in the game and chosen credit spreads from the hoorah advertising them on the internet. Totally new game for me and I'm just a basic NOVICE again and been out of the trading game for more than a dozen years. To some extent the market has changed due to computer trading technology. Options are also more tradeable today from back when I used to pay big bucks in commissions and wait 20 minutes or more for a discount broker to verbally make my trade and get back to me. Brokerage commissions have dropped a lot. Speed is a lot better too. You would think you could make your profit goals in options?
From looking at it, they are the same chart, except they have different numbers on the side, expressing different ways of showing percentage gain. You could probably trade either one off the other signals?
Did some analysis of both charts. Starting with the OPEN day of the Monday of the option month.
It is certainly clear, you have to pick the turning point for the month, to place a vertical Credit Spread outside, or above or below a resistance or support horizontal line and identifying that turning point is the problem.
Interestingly enough the NDX didn't really give good premiums any more than I thought it would going out. 100 points using the weekend BIG CHARTS option chains only gave you .15 cents in the spread for a 100 points away from the action.
To get $1.20 in credit, the 1905 calls had to be sold. The resistance top was at 1900 thereabouts. That is VERY CLOSE and makes it imperative that one had a good turning signal in the trend.
In the OEX it was a little better. The 515 strike above the 510 STRIKE which is the resistance horizontal line gave + .85 cents and if I remember rightly we are trying to get a $1.20 as a trade. To get the $1.20 you would have to sell the 510 STRIKE in CALLS as the resistance line overhead for a bear move. Since the trend has at least momentarily turned down, the 510 looks like a good bet. The prices were better in the OEX.
Since the charts are the same, more or less, in the NDX and the OEX, guessing what is going to happen later this option month - 3 weeks left is kind of iffy? In order to get $1.20 it sure looks like you have to pick a trend turning point for the option month. For this month, the signals are still mixed and I would not trade yet.
I generally use the BIG CHARTS computer indicators and my favorites are DMI and Volatility Fast and RSI for the weekly. For analysis purposes on a monthly basis I tried the others and selected MOMENTUM, ULTIMATE OSCILLATOR and Fast Stochastic. The idea to identify the trend change, for the whole month. Chart patterns show a FLAG forming and a breakout should be to the upside sometime. But within the month? Don't know? Would sit and wait I guess?
Going back to the previous option month the trend change and the entry for a Vertical Credit Spread was more clear cut. You could follow the daily bars down with a trend line, or any of the three mentioned indicators. The momentum in this case gave the clearest signal we had changed trend about ten days into the action for the option month. One of the problems with computer indicators is that they are lagging indicators and usually the last three days will adjust themselves as each day progresses. Still you can get a signal if you are familiar with charts and daily bars. Higher lows was the signal in this case.
The month before; that END OF MAY week to third Friday of June was a tricky forecasting month apparently. In the NDX if you took the first signal as a trend change ENTRY, you would have sold CALLS in a VERTICAL which would have gone bad on you, depending on what premium you had chosen at the time. It ended at Expiration slightly more than wanted. On the other hand if you had taken the second trend change signal in the month, violation of trend line, or higher low, you would have done well with Vertical PUTS.
Admittedly this is only a 3 month study. Phil probably has some adjustment that he could use to get out of the first spread toward expiration week, when beginning to be threatened. Not sure how that would work, he might please explain that? In the OEX you would have won by the skin of your teeth, but in the NDX you would have got penetrated into your spread.
The bear plunge before that Month, I did well and managed to get in two or three trades, forget now, but it was a nice trend, using horizontal resistance lines over the pullbacks as the bear fell. Just placing the Vertical CALL spreads above those resistance lines. Used a trend line to keep trading going down.
****************************
*****************
In response to those 2 or 3 fellows on here, that insist I become familiar with GREEKS, I'm going to give it a whirl this coming week. I do know DELTA and THETA, but not familiar with GAMMA, or the other one. Nor am I familiar with how to use them? In a credit spread I know I collect premium called THETA and most of it is in the last week of the month and in particular the last two days of expiration week.
My problem mentally with GREEKS, I have no reference point. The numbers for the GREEKS change hourly with the index movement. So what does that tell me? Nothng apparently? I can more forecast using the index and daily, or hourly bar charts? I'm presuming from the comments of people trading GREEKS that there is some sort of variable sliding change in the numbers that tell you, or forecast for you, what is GOING TO HAPPEN? I'd guess you would have to compare the four GREEKS one to the other as they constantly change and somewhere in that, one changing more than another would probably forecast, or tell some kind of story?
From what little I've read on this FORUM, the market makers constantly adjust their positions using GREEKS, which is intriguing. Haven't a clue though, nor am I sure it is relevant to a retail trader? There are also some Delta Neutral strategies I've read about, but haven't really yet found any application in learning CREDIT SPREADS yet. They may work for other types of spread trading? Anyway, I'm going to this week, keep a running record of the changes of the four GREEKS and see what they tell me in relationship to changing index prices and movement and premiums. Maybe I can get something out of them?
***********************
I might just touch on another point, as a novice in credit spread trading study, is the matter of the goal of a trader in credit spreads. People have different expectations and one person might want to earn $30,000 net profit for the year, another $50,000 and another $100,000 or $250,000. I believe Phil is in the latter category from things he has said? Myself, my goal is $100,000 net profit before income taxes. Otherwise I'm seriously going to think otherwise. Phil has often mentioned 20% is a good return on capital at the end of a year and he is trading professionally. Considering CD's in banks are returning near zero and inflation is running 6% to 7% it behooves one to find another way of getting better returns. In the Market Wizards book, the last one a friend donated to me, when he came to visit me in the Belize Alps. Linda Raschke is touted as a Market Wizard earning about 40% on capital a year. She was at that time, doing a system of long betting, with heavy drawdowns. She has since grouped with some other traders to handle other peoples money. That tells a story of itself, if you read between the lines. There are a number of systems with drawdowns as part of the system. The attraction for me in CREDIT SPREADS is if you get it right, you can, or should be able to get it down to almost 100% correct and several people are claiming they have done so from 2 years to 4 years. You never know whether to believe them, but it seems sort of possible? That's what I'm trying to find out. I don't know your goal in this? Everybody is different with different needs.
Which brings up another point from back in the 1980's when I used to trade stocks. Back then the system reviewers would not credit anybody's claims that did not have provable audited accounts, for a minimum of three years. Which seems a good standard. So whatever percentage on capital you can show for a year is basically the rule of thumb, on whether a particular system, or advice is any good. I don't know what the deal is these days? I've just jumped back in the game and chosen credit spreads from the hoorah advertising them on the internet. Totally new game for me and I'm just a basic NOVICE again and been out of the trading game for more than a dozen years. To some extent the market has changed due to computer trading technology. Options are also more tradeable today from back when I used to pay big bucks in commissions and wait 20 minutes or more for a discount broker to verbally make my trade and get back to me. Brokerage commissions have dropped a lot. Speed is a lot better too. You would think you could make your profit goals in options?