SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Mav, I haven't been here long but certainly no stranger to BBs. I know you are a straight shooter and in many ways I like and respect that. However, it is my interpretation that if she deleted the post a little after posting it, then maybe she realized it was a mistake, or that it was inappropriate, or whatever ... plus, I didn't get the impression that it was directed to you. So I just think that it wasn't something that was appropriate to make that kind of comments on. Be that as it may, I still like your "other" contributions.
and he's 
cause HE wanted to be a hippie in the 60's
drugs...sex... and rock and roll
Peace brother
cause HE wanted to be a hippie in the 60'sdrugs...sex... and rock and roll
Peace brother
Just a few general comments on the discussion:
1. "Telling it like it is" really only means being honest. Being nasty about it is a personal choice
. Like if I ask Jessica Alba about what I am planning to wear and she says "Those colors do not match and look bad together, you should choose another shirt", that is telling it like it is.
Saying "You look like an idiot in those colors, change before you embarass yourself, me, my family and every other male on the face of the planet, even blind people!" is doing it in an unneccesarily rude way and obscures the message that is trying to be conveyed. let's not use "telling it like it is" as a license to say it rudely.
2. I find the disucssions where we tell others what would make them sleep better at night amusing. If you are in any position which keeps you up at night or has you sick to your stomach while holding it, then get out immediately as you should not be in that position to begin with. I sleep fine at night with my credit spreads because I have confidence in my strike selection and loss limitation measures (futures, partial hedges, etc...). I cannot perfectly hedge the position because it is not a risk-free trade but by not putting all my eggs in one basket, I know I will never blow up entirely. So I sleep fine. I get a little stressed at times on certian positions but so does every trader on their portfolio and that is normal. I would actually be more stressed watching my portfolio shrink month after month on losing debits waiting for the move. Just a personal preference. Trade the strategy or approach that best fits your trading approach. No law says you have to lose everything on an adverse move or even sit by and let it take you out.
3. For the strikes that I personally choose and they way I manage the trades, the credits are better for me than the debits. Based on last year, I would have made no money or lost money if I did debits at the same strikes instead of credits. Intraday, they never really got juiced at all and who is to say I would have gotten out at the higg point of their premium. Every spread I sold last year never was ITM at any time and even the 2 adjustments I made, did not cost a lot of money to buy back. In fact it would have brought in less to sell if it were a debit given the SPX b/a spreads and with the debit bleed I would have had all summer I would have been close to flat I think. Not making a generalized statement on credits v. debits, but in my strike selection and the way I manage the trades, the credits work best for me. Credit and debit spreads are the same in theory but in SPX practice they have been quite different in my experience. So for me I got to stick with what works.
As I said, with SPX it does not make sense given the costs and skews on the put side but anyone interested in the debit positions should look to SPY or XSP.
4. Finally, assuming the belief and the generalization that the positions are the same leads to me ask then why one has a preference to argue for debits over credits as opposed to saying you could do either and it would not matter? One has to assume that debits would be held until they reached their maximum value to get that nice windfall to me is as erroneous as assuming i would hold my credit spreads until they hit the maximum loss.
Moreover, assuming one would get out early and take the profits on a debit spreads also has to assume that one would get out with a limited loss on a credit spread and make an adjustment to bring in credit to cover the cost. In my two adjustments I either took a much smaller loss or still made money. If the market was really moving against me I would get out of the way and make money the other side or take a futueres position to hedge. I must simply take measures to limit my losses and get out. I am not afraid of losses, just big ones so I want to limit those as best as I can. I cannot do anything about a 9/11 event so I do not lose sleep over it.
As I always said, the strategy you choose is not as meaningful as the way you manage your risk and portfolio. I manage my risk and portfolio much better with credits than I could with debits on the SPX. I am not 100% right or have 40 months of consecutive profits, but I a make money consistently and that is my goal. I got to use the strategies that fit me as best as I can and I would never tell anyone to blindly go against their own trading style.
So what is the bottom line? Trade the strategy or approach that best fits your personal trade and risk management style and thoroughly research the risk and reward profiles of that strategy and of the underlying you are trading it on. Risk money that you can and not 100% of it. Losses are inevitable so the goal is not to ever have one, but to make them as small as possible under the conditions and keep your capital. Trade with a long-term perspective no matter how short the time frame of your trades. Although I day and month trade, I focus on annual results.
And most importantly, never let more than 5 pages go by without a JA pic...
1. "Telling it like it is" really only means being honest. Being nasty about it is a personal choice
. Like if I ask Jessica Alba about what I am planning to wear and she says "Those colors do not match and look bad together, you should choose another shirt", that is telling it like it is. Saying "You look like an idiot in those colors, change before you embarass yourself, me, my family and every other male on the face of the planet, even blind people!" is doing it in an unneccesarily rude way and obscures the message that is trying to be conveyed. let's not use "telling it like it is" as a license to say it rudely.
2. I find the disucssions where we tell others what would make them sleep better at night amusing. If you are in any position which keeps you up at night or has you sick to your stomach while holding it, then get out immediately as you should not be in that position to begin with. I sleep fine at night with my credit spreads because I have confidence in my strike selection and loss limitation measures (futures, partial hedges, etc...). I cannot perfectly hedge the position because it is not a risk-free trade but by not putting all my eggs in one basket, I know I will never blow up entirely. So I sleep fine
. I get a little stressed at times on certian positions but so does every trader on their portfolio and that is normal. I would actually be more stressed watching my portfolio shrink month after month on losing debits waiting for the move. Just a personal preference. Trade the strategy or approach that best fits your trading approach. No law says you have to lose everything on an adverse move or even sit by and let it take you out.3. For the strikes that I personally choose and they way I manage the trades, the credits are better for me than the debits. Based on last year, I would have made no money or lost money if I did debits at the same strikes instead of credits. Intraday, they never really got juiced at all and who is to say I would have gotten out at the higg point of their premium. Every spread I sold last year never was ITM at any time and even the 2 adjustments I made, did not cost a lot of money to buy back. In fact it would have brought in less to sell if it were a debit given the SPX b/a spreads and with the debit bleed I would have had all summer I would have been close to flat I think. Not making a generalized statement on credits v. debits, but in my strike selection and the way I manage the trades, the credits work best for me. Credit and debit spreads are the same in theory but in SPX practice they have been quite different in my experience. So for me I got to stick with what works.
As I said, with SPX it does not make sense given the costs and skews on the put side but anyone interested in the debit positions should look to SPY or XSP.
4. Finally, assuming the belief and the generalization that the positions are the same leads to me ask then why one has a preference to argue for debits over credits as opposed to saying you could do either and it would not matter? One has to assume that debits would be held until they reached their maximum value to get that nice windfall to me is as erroneous as assuming i would hold my credit spreads until they hit the maximum loss.
Moreover, assuming one would get out early and take the profits on a debit spreads also has to assume that one would get out with a limited loss on a credit spread and make an adjustment to bring in credit to cover the cost. In my two adjustments I either took a much smaller loss or still made money. If the market was really moving against me I would get out of the way and make money the other side or take a futueres position to hedge. I must simply take measures to limit my losses and get out. I am not afraid of losses, just big ones so I want to limit those as best as I can. I cannot do anything about a 9/11 event so I do not lose sleep over it.
As I always said, the strategy you choose is not as meaningful as the way you manage your risk and portfolio. I manage my risk and portfolio much better with credits than I could with debits on the SPX. I am not 100% right or have 40 months of consecutive profits, but I a make money consistently and that is my goal. I got to use the strategies that fit me as best as I can and I would never tell anyone to blindly go against their own trading style.
So what is the bottom line? Trade the strategy or approach that best fits your personal trade and risk management style and thoroughly research the risk and reward profiles of that strategy and of the underlying you are trading it on. Risk money that you can and not 100% of it. Losses are inevitable so the goal is not to ever have one, but to make them as small as possible under the conditions and keep your capital. Trade with a long-term perspective no matter how short the time frame of your trades. Although I day and month trade, I focus on annual results.
And most importantly, never let more than 5 pages go by without a JA pic...
Mav,
As a current under-paid and under-appreciated statistics/Calc teacher, I'm always exploring the theoretical side of options positions.... let me share some thoughts.
Each strategy has it's time and place in the market. Some more so than others depending on the structure of the trade with respect to your outlook (target price and time frame).
But as Nassim Taleb once said,
"We tend to think that traders make money because they are good. Perhaps we have turned the causality on it's head; we consider them good just because they make money. One can make money in the financial markets totally out of randomness."
My analysis of the 'ZERO SUM' game we call trading options, from a theoretical point of view... is just that ZERO. What I mean to say is that.... given enough time... over time... the expected return at best is ZERO. (less commission, b/a, etc)
Now... my recent analysis of trading from a 'greek perspective', rather than an options position perspective.... is unclear. Would you elaborate on the following analysis:
I have found trading volatility (long vol using diagonals), then selling volatility (selling calendars against the diagonal), and converting to THETA decay over an alternating two month cycle with various strike prices and positions is as close to ZERO sum as I can find. It tends to remove the Delta/Gamma game which most traders play.
Could you elaborate on this perspective and suggest any variations you may have experienced.
Thanks,
Murray
As a current under-paid and under-appreciated statistics/Calc teacher, I'm always exploring the theoretical side of options positions.... let me share some thoughts.
Each strategy has it's time and place in the market. Some more so than others depending on the structure of the trade with respect to your outlook (target price and time frame).
But as Nassim Taleb once said,
"We tend to think that traders make money because they are good. Perhaps we have turned the causality on it's head; we consider them good just because they make money. One can make money in the financial markets totally out of randomness."
My analysis of the 'ZERO SUM' game we call trading options, from a theoretical point of view... is just that ZERO. What I mean to say is that.... given enough time... over time... the expected return at best is ZERO. (less commission, b/a, etc)
Now... my recent analysis of trading from a 'greek perspective', rather than an options position perspective.... is unclear. Would you elaborate on the following analysis:
I have found trading volatility (long vol using diagonals), then selling volatility (selling calendars against the diagonal), and converting to THETA decay over an alternating two month cycle with various strike prices and positions is as close to ZERO sum as I can find. It tends to remove the Delta/Gamma game which most traders play.
Could you elaborate on this perspective and suggest any variations you may have experienced.
Thanks,
Murray
I think the market is getting a little ahead of itself on some good earnings reports. With OIL at $74 on the futures and CPI still showing signs that inflation may still be a concern of the FED, I think we are getting a little overbought here.
My technical indiactors are showing short-term bullish and they have not hit the overbought levels yet so what I said above is just my personal opinion. I think the rally could push is into the 1320/1330 range with some more earnings, GOOG perhaps but it could stall on the next little bad nugget and come back to 1310-ish which was the previous resistance now broken.
Anyway, when it gets a little ahead of itself so fast, the pullback can be swift...
My technical indiactors are showing short-term bullish and they have not hit the overbought levels yet so what I said above is just my personal opinion. I think the rally could push is into the 1320/1330 range with some more earnings, GOOG perhaps but it could stall on the next little bad nugget and come back to 1310-ish which was the previous resistance now broken.
Anyway, when it gets a little ahead of itself so fast, the pullback can be swift...
Why press my luck? lol.... I already have my IC position for MAY, no need to let greed get in the way 
. Also... I could be wrong naturally and no need to load up on the one side.
If I want to play my analysis, then I would be better off doing a diagonal calendar perhaps which I am looking into right now.
. Also... I could be wrong naturally and no need to load up on the one side.If I want to play my analysis, then I would be better off doing a diagonal calendar perhaps which I am looking into right now
.