SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Mark, I see my atempt to inject humor into this failed. Sorry. I was just trying to have a little fun. I think 98% of us here highly value and respect Mav's, yours coaches et-al opinions.
As I have said - I lost a pretty good chunk using limited risk spreads back in Oct. I was always wondering if a cheap low cost hedge would be a simple stop loss order tied conditionally to the SPX. My rationale was that an order has no theta decay or gamma etc. Its one of the cheapest options on the planet. But I think Mav just convinced me that in a violent price swing its impossible to get orders filled. That info and expert knowlege alone was worth listening in on...
TS
i would like to see if i can discuss what happened to me recently. i know to the more experienced these points may be laughable; but to me this is normal...plus this is an anonymous board...
recently i had an unpublished atm short put (er2 755 nov) that was sold for 6 pts. the next couple of days the market took a 16 pt drop and busted through my short. the price went to 11 pts. i was pissed. that was an atm. i was going to buy it back at 12 , but of course the market reversed and i bought it back for 4.70.
my standard plays are always shorting 80 pts out at around 2 to 3pts. if the market took an 80 dive in a day i really believe that i can get out. obviously this weekends heated discussion has effected me. i don't want to lose my gains. coach mentioned that his $$ is not his entire port, my case is the same.
i do appreciate jeffm articulating much of what i wanted to say, thank you. i happen to agree with you; whether we are both right or wrong!
rally, are you still doing ctm spreads? you seem to agree completely with mav, except in that i think mav does not like ctm spreads.
i wonder if he thinks what you do is also in the end doomed to failure. are you a proponent of building a group of options properly and the selling the curvature? (mav, forgive me if my terminology is not 100% regarding curvature. i am not misusing the terms on purpose.)
recently i had an unpublished atm short put (er2 755 nov) that was sold for 6 pts. the next couple of days the market took a 16 pt drop and busted through my short. the price went to 11 pts. i was pissed. that was an atm. i was going to buy it back at 12 , but of course the market reversed and i bought it back for 4.70.
my standard plays are always shorting 80 pts out at around 2 to 3pts. if the market took an 80 dive in a day i really believe that i can get out. obviously this weekends heated discussion has effected me. i don't want to lose my gains. coach mentioned that his $$ is not his entire port, my case is the same.
i do appreciate jeffm articulating much of what i wanted to say, thank you. i happen to agree with you; whether we are both right or wrong!
rally, are you still doing ctm spreads? you seem to agree completely with mav, except in that i think mav does not like ctm spreads.
i wonder if he thinks what you do is also in the end doomed to failure. are you a proponent of building a group of options properly and the selling the curvature? (mav, forgive me if my terminology is not 100% regarding curvature. i am not misusing the terms on purpose.)
I have not made any decision to stop SPX credit spreads. My retail account that I manage is still SPX spreads and closed-end funds all the way. The diagonals, futures and vol trading is the prop account only.
I just have not gotten any fills for NOV and now not for DEC yet so still on the sidelines. My last SPX spread was OCT. For the year I am up about 23% on margin for SPX spreads so it has been a good year for me with no SPX drawdowns.
I just have not gotten any fills for NOV and now not for DEC yet so still on the sidelines. My last SPX spread was OCT. For the year I am up about 23% on margin for SPX spreads so it has been a good year for me with no SPX drawdowns.
Here is Mav's quote: " I've seen short gamma traders wipe out on 5% moves. They happen on a daily basis."
The clear implication is that short gamma traders (including you) are on the fast track to a wipeout. So I think an audited track record of a cta who is naked short (the riskiest of short gamma) for 7 years without a >5% drawdown is very topical.
How am I out of line? Because I called him out for his arrogance? Mav's posts can be very informative, but that doesn't give him a free pass to behave poorly. Doesn't a conversation go better when the participants discuss the issues without heaping derision on those they disagree with?
The clear implication is that short gamma traders (including you) are on the fast track to a wipeout. So I think an audited track record of a cta who is naked short (the riskiest of short gamma) for 7 years without a >5% drawdown is very topical.
How am I out of line? Because I called him out for his arrogance? Mav's posts can be very informative, but that doesn't give him a free pass to behave poorly. Doesn't a conversation go better when the participants discuss the issues without heaping derision on those they disagree with?
I am not sure i understand what you are getting at. What does mav liking CTM credit spreads or thinking they are doomed have to do with me or anyone else trading them for that matter? Yes, i am in agreement with him. I am rarely short unbounded gamma and it is never cheap gamma at that. Such exposure is usually on my books for a very brief period of time(mostly intraday) as i am building a position. I must've said this at least 100 times in the past. I am strictly net short gamma positive theta all the time. I do extremely well during rangebound markets or slow trends(which is where the curvature approach will do only well) and poorly during volatility into a single direction.(which is where the curvature approach will earn instead of lose). There is a tradeoff. All this comes with the territory of what you are good at. I have no intention of net owning any curvature which is my preference but i am aware of the premise behind mav's approach.
No, i currently dont sell verticals. Me posting my SPX trades/system in the past was more of an attempt to demonstrate you can collect premium month to month without exposing yourself to big risks. Nothing more, nothing less. Every strat is doomed in the hands of a poor trader.
Since when did everyone get a case of PMS... jeez
sorry for being unclear. i will try to articulate better: if you agree with mav on most points and he says selling ctm credit spreads are not smart or profitable ; then are you reassessing that particular trading method? that's all i am asking. no sarcasm or ill intent. if i suggested that you sold unbounded cheap gamma; i retract it. i never intended on saying that , ever.
I am surprised at this kind of thinking coming from a former market-maker. From you I would expect answers like "sometimes", "maybe", and "compared to what?". Naked short premium does not equal bankruptcy, and long premium does not equal profit. Options portfolios cannot be viewed in simple absolutes. When you sell penny vertical credit spreads, you are exchanging one kind of dangerous risk for another. When you sell naked ATM SPX strangles instead of buying stock, you are exchanging one kind of risk for another. When you deposit funds with Maverick's firm in exchange for leverage, you are exchanging one kind of risk for another. Trading is a complex decision making process. When people try to make complex decisions quickly, they tend to rely on simple heuristics. Learn not to rely on heuristics. Specifically, learn not to rely on the very common, very false heuristics reiterated hundreds of times in this very thread:
1. 95% of traders loose
2. 90% of options expire worthless
3. Selling naked premium is too risky
4. Selling naked premium is more risky than selling penny vertical spreads or other "credit spreads"
5. Mathematical probability and expectancy are the same thing
6. Buying or selling an option always has a negative expectancy because of the bid-ask spread
Stop comparing apples to oranges, oranges to snakes, snakes to orangutans. Learn the specific kinds of risks applicable to your specific kind of position, your specific scenario, your specific net worth. For f**cks sake, stop relying on random representativeness selections from the universe of trading mantra. Stop referencing the most available examples of firms or funds that survived or exploded to support your conjecture about the validity of a particular strategy. Its just one curve fit or another, one random uptick or another.
-segv