SPX Credit Spread Trader

rallymode · May 31, 2006

Quote from Synaptic:

This may not seem like good TA but humor me here .....observing the SPX over the last 1-2 years, I notice that using a Full Stochastic setting of say 14,6,6 and watching when the fast line has moved to at least 90 or above, if you sell a FOTM bear call spread when the slow line crosses the fast line, you end up with some very safe trades.

Whats important to remember when using TA is that overbought can stay overbought and oversold can stay oversold for a while before it actually turns. You can see examples on any chart you look at. If you are going to rely on TA alone, you better make sure you live to trade another day when the exception happens.

What you said is true, opening call positions within 10 points of the 3 month high and put positions within 10 points of the 3 month low would have been very profitable over the past 2 years.

Cache Landing · May 31, 2006

That's what I like to see... a little late day rally. hopefully we will get back up around 1280 relatively quickly so that I can temp the MMs again.

Synaptic · May 31, 2006

Right... overbought can stay that way, but with a 50 - 60 point cushion (FOTM), you would have certainly been in good shape when the market finally did turn over for that cycle. Of course, you still manage the position in the case of trouble.

Quote from rallymode:

Whats important to remember when using TA is that overbought can stay overbought and oversold can stay oversold for a while before it actually turns. You can see examples on any chart you look at. If you are going to rely on TA alone, you better make sure you live to trade another day when the exception happens.

What you said is true, opening call positions within 10 points of the 3 month high and put positions within 10 points of the 3 month low would have been very profitable over the past 2 years.

daved275 · May 31, 2006

Quote from Synaptic:

This may not seem like good TA but humor me here .....observing the SPX over the last 1-2 years, I notice that using a Full Stochastic setting of say 14,6,6 and watching when the fast line has moved to at least 90 or above, if you sell a FOTM bear call spread when the slow line crosses the fast line, you end up with some very safe trades.

To everyone who use stochastics to help them determine their entry, what parameters do you use? For example Synaptic uses 14. 6, and 6; and I use 14, 3, and 3. How about the rest of you?

DAVE

IV_Trader · May 31, 2006

where is DonnaV?

codyhopkins · May 31, 2006

DonnaV has withdrawn from this board, but she assured me that she is fine, but just too busy right now.

Cody

rdemyan · May 31, 2006

Synaptic:

I'm only doing FOTM bear calls myself because of the black swan. Based on some preliminary experience I think I can do 3 to 5% of the margin committed a month. But, need to be careful during strong up months (typically the end of the year). Donna V. legged into bear and bull calls late last year and was quite successful. So this is a possibility during those up months.

One nice thing is that I haven't sweated even a drop over the current down draft. However, my time might come during those strong upmonths. But at least the market doesn't move up as strongly as it can going down.

Quote from Synaptic:

Coach,

The volatility changes over the last month have me thinking that I don't want to do PUT spreads anymore, only CALL spreads. I'm just concerned that a black-swan event or run of panic selling could crtically hurt my account and psyche. I'm starting to think that I only want to do credit spreads exclusively when stochastics look right and I can stay FOTM. I want to then possibly augment these trades with debit spreads where my potential loss is known up-front. Any comments ?

rsflint · May 31, 2006

Quote from Heatheranderson:

I am a big fan of Robert Kiyosaki.Most of my options profits go into buying Real Estate which gives passive income.I am researching PPMs to indugle in some speculation.

Not to deviate from the main topic of this thread but --- Didn't Mr. Kiyosaki himself give a warning about Real Estate sometime last year??

Rising interest rates, loose loan standards (no doc loans, etc), ARM & Interest Only payments rising, federal reserve continuing to raise the prime rate and making hawkish statements (just read today May meeting minutes they were thinking about a 50 basis point crank in May!), and where I am in So.California real estate inventory has DOUBLED since beginning of the year.

I don't believe Real Estate especially on the coastal regions is a good thing to get into right now. However, if you are in it for the long haul (10+ years), looking out of California, and the numbers pencil out go for it.

Some food for thought

Read more here:
http://www.bubbletracking.blogspot.com/
http://www.thehousingbubbleblog.com/

andysmith · May 31, 2006

Greed.

Quote from rallymode:

I will never understand the rush to be in a position each and every month.

Maverick74 · Jun 1, 2006

Quote from codyhopkins:

DonnaV has withdrawn from this board, but she assured me that she is fine, but just too busy right now.

Cody

Actually, I PMed her and I'm not so sure she is doing OK. I don't want to go into details here. I wish her the best regardless. She is taking some time off after a nasty hit. At least she has her health.