SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Notice it is only a 5 point spread, so still 6% credit as Coach states. But I kinda agree with you. I really don't want to open a put position on an upday myself. I'd rather miss out on some action than to get in on the wrong side of the swings. Maybe I am spoiled by this non-trending market though. If we have started an uptrend, getting into some puts here is a great idea.
I'm back from a two week break and have done some thinking and wanted to get some feedback. Coach Phil, you are providing an excellent free service here and I am very grateful to you. The following are genuine, honest thoughts and not meant to undermine Phil's efforts.
I love credit spreads and have had success with them for the past few months.... BUT I'm increasingly troubled by the reaction of almost all the current/former professional traders (almost all of them significantly more exerienced than Coach) who visit this site. They just cannot believe the risk/reward we're undertaking. Now if you are trading a few thousand $, no problem. But if you are trading six figures (even if it is less than 50% of total account) the risk/reward seems very out of balance. I'm struggling with this notion and some insight/thoughts would be helpful.
I love credit spreads and have had success with them for the past few months.... BUT I'm increasingly troubled by the reaction of almost all the current/former professional traders (almost all of them significantly more exerienced than Coach) who visit this site. They just cannot believe the risk/reward we're undertaking. Now if you are trading a few thousand $, no problem. But if you are trading six figures (even if it is less than 50% of total account) the risk/reward seems very out of balance. I'm struggling with this notion and some insight/thoughts would be helpful.
Andy:
The same thoughts have crossed my mind. I would like to pose two counter points:
1) The less obnoxious professional traders that have posted here
I think may have realized that credit spreads, if properly managed (which is what Coach strongly advocates), are not as bad as they first thought. Still, I don't believe that they would trade these positions, themselves.
2) Professionals can constantly monitor and adjust their positions. For me as a retail trader, I can't do that, so credit spreads are easier to trade. Also, I believe I've seen posts from a professional trader (Michael) in another forum, which you belong to, that essentially say (if I got this correct), that you can literally put on any trade you want. Ultimately, it's the adjustments that matter and rolling with the punches until you can get out with some profit or a minimal loss. But again, he's a professional and has the time, knowledge and experience to do that.
My only reservation about credit spreads, is the black swan event. Other than that, I feel totally comfortable with trading the SPX credit spreads (but not stocks, under any circumstance).
If you don't mind my saying, I thought that your positions in October were not far enough OTM and as a result you went on a roller coaster ride that was emotionally draining (as you know I had a worse experience, so I know what you went through). Fortunately you didn't lose any money (or minimal), but it's probably got you thinking about the whole strategy (also been there). My feeling is I would rather give up some premium than go through that again.
Finally, you say that the risk/reward seems very out of balance. Shouldn't we factor probability of success into that "equation"?
Good luck with whatever strategy you decide to trade.
The same thoughts have crossed my mind. I would like to pose two counter points:
1) The less obnoxious professional traders that have posted here
I think may have realized that credit spreads, if properly managed (which is what Coach strongly advocates), are not as bad as they first thought. Still, I don't believe that they would trade these positions, themselves.
2) Professionals can constantly monitor and adjust their positions. For me as a retail trader, I can't do that, so credit spreads are easier to trade. Also, I believe I've seen posts from a professional trader (Michael) in another forum, which you belong to, that essentially say (if I got this correct), that you can literally put on any trade you want. Ultimately, it's the adjustments that matter and rolling with the punches until you can get out with some profit or a minimal loss. But again, he's a professional and has the time, knowledge and experience to do that.
My only reservation about credit spreads, is the black swan event. Other than that, I feel totally comfortable with trading the SPX credit spreads (but not stocks, under any circumstance).
If you don't mind my saying, I thought that your positions in October were not far enough OTM and as a result you went on a roller coaster ride that was emotionally draining (as you know I had a worse experience, so I know what you went through). Fortunately you didn't lose any money (or minimal), but it's probably got you thinking about the whole strategy (also been there). My feeling is I would rather give up some premium than go through that again.
Finally, you say that the risk/reward seems very out of balance. Shouldn't we factor probability of success into that "equation"?
Good luck with whatever strategy you decide to trade.
Yes it is $150,000 risk not $300,000 risk.
Also, I did not enter this position today will full margin so if we do have a good down day I will add more puts.
Basically I am bullish through the the early part of Thanksgiving and therefore chose the put strikes I did as there are several levels of support between the market and the strike 75 points away. I am looking at sideways to upwards movement in NOV.
If we get a good down day back to 1200 then I will add another amount of positions and just ride it to the end of the month. I was happy with the strikes and the return (6%) and will just let time decay work on my NOV position for now. Then after NOV expiration, will look forward to Thanksgiving bounce.
Phil
Also, I did not enter this position today will full margin so if we do have a good down day I will add more puts.
Basically I am bullish through the the early part of Thanksgiving and therefore chose the put strikes I did as there are several levels of support between the market and the strike 75 points away. I am looking at sideways to upwards movement in NOV.
If we get a good down day back to 1200 then I will add another amount of positions and just ride it to the end of the month. I was happy with the strikes and the return (6%) and will just let time decay work on my NOV position for now. Then after NOV expiration, will look forward to Thanksgiving bounce.
Phil