SPX Credit Spread Trader

[TrendSailor]

Quote from optioncoach:

Since when did everyone get a case of PMS... jeez

I was wondering the same thing. I suspect its similar to premature menopause that some of the women folk get with the passing of time. If true then it may be nothing more than a noxious long term side effect of watching the theta decay players (with or without trading skills) making easy money and not wiping out often enough. Give it enough time - it should clear up in 3-6 months.

TS

 

[rallymode]

Quote from domestic:

and he says selling ctm credit spreads are not smart or profitable ; then are you reassessing that particular trading method?

I havent heard mav say a vertical traded at 1:1 or 2:1 risk reward directionally is a bad strat. In fact i am quite sure he has said a hundred times it isnt the strat that makes the money, its the trader. If you are earning nicely without exposing yourself to big draws, then you are going down the right path. That's not the case with cheap/naked gamma.

If i get a chance later on i may type a long summary of the long gamma and short gamma approaches and how they can be used in isolation or combination so that maybe we can put this to rest but for now i shall retire myself from the discussion.

 

[dagnyt]

Quote from jeffm:


Doesn't a conversation go better when the participants discuss the issues without heaping derision on those they disagree with?

YES!

Mark

 

[dagnyt]

Quote from segv:

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.

Agree. I have seen plenty of traders go broke, choking on long gamma. I never said naked shorts lead to bankruptcy. What I did say was that I have stopped selling naked short options. My current status requires that I pay more attention to preservation of capital than to potential profits. Thus, for me, no more naked shorts. Besides, those shorts require way too much margin.

Until the past few years, I was entirely invested in covered calls and naked puts. Today I still take risk, but it's not unlimited. I prefer collars to covered calls and put spreads to naked puts. But, I like DD even better.

Mark

 

[domestic]

Quote from IV_Trader:

this place becoming a grave yard to a few option's posters on ET that willing to share some of their knowledge. First Risk and now I have a feeling that Mav will stop posting too. Soon we will be reduced to " just sell the premium and let theta do it magic" type of posts.
Sad

risk was taken out as you know. i think these discussions are great. some bits of good info comes out. as long as there is some tough skin here, things should be fine, although it seems like to me you and mav do like the sarcasm thing a little too much. i can take it though.

additionally , if you think i "sell the premium and let theta do it magic" . i disagree wholeheartedly.

we have different ways to trade. isn't a community like this partly supposed to showcase different styles thus allowing readers to study them?

 

[jj90]

In light of the recent posts going back bout 5 pages, here is my question that I have been pondering recently.

What does 1 do in a 3+ sigma move if short premium? Can be ratio spreads, naked shorts, Coach's SPX credit spreads etc.

While I know there has been discussion on black swans in this thread, not having seen the posts, and not about to go thru 1990+ pages, I will presume the discussion to be purely a warning. Eg. ' watch out for black swan', but not saying any ways to deal with it. Forgive my ignorance.

I understand the difference between theo. risk and reality risk. Example being coach's short verticals. Coach assumes the risk of a circuit breaker type event because if he reversed his verticals, he would have gone broke already.

While the collar rules helps to reduce vol, it doesn't protect vs an event that triggers a circuit breaker. And for most of us here short gamma, in whatever form, that event would have left us at a huge loss anyways. So that doesn't help. It's worse to the upside.

My only conclusion is that while waiting for the 1% massive loss to happen the other 99% of the time I should have accumulated enough profits from being short but not naked gamma to weather out the drawdown. However you would agree this isn't very proactive. Hedging using futures isn't really an answer, as the event would occur instantaneously and the futures would be useless.

 

[LeonPhelps]

"Sell the premium and let theta do the magic!"

Boo-yah Kaashaan!

100x1310/1320 Dec put credit spread for 0.4. 4k or 4% return on 100k margin. That's friggin 60% a year!

I'm only using 60% margin, just to be safe. Will have to settle for 33% per year.

That's the price you pay to be conservative and sleep well at night.

 

[IV_Trader]

Quote from domestic:

risk was taken out as you know. i think these discussions are great. some bits of good info comes out. as long as there is some tough skin here, things should be fine, although it seems like to me you and mav do like the sarcasm thing a little too much. i can take it though.

additionally , if you think i "sell the premium and let theta do it magic" . i disagree wholeheartedly.

we have different ways to trade. isn't a community like this partly supposed to showcase different styles thus allowing readers to study them?

domestic , you can call my posts sarcastic or any other names in the book. You are also free to ignore my posts all together , like I do with 99% of all option's traders on ET. It is not about me or you. I am one of the few (and maybe the only one) ET traders that buys long options (95% of the time). Should I jump and attack every time when I read following statements ?

1. Long is for losers
2. 90% of all options expire worthless
3. VIX to zero , longs losing their asses
4. You got the point

I just smile because my PnL tells different story . As a retail trader , I found ET to be excellent place to get important info which is not available for outsider ( industry) like me anywhere else. There is only a few very knowlageble and WILLING TO SHARE/ANSWER posters here. Its took me a while ( after reading thousands of posts) to find out who they are. Lately , my "edit buddy list "is shrinking , because good members are leaving (for all kind of reasons) and I don't see any new comers taking their places.
So when one of the good posters like Mav using a bit of sarcasm or whatever else he was accused of here in the last few days , do you think I care ? Would option's threads will be a better place ( for you and me) without Mav ? Its not up to us to tell him how to construct his posts , if some don't like it use the ignore button. I rather concentrate on WHAT he is saying rather than HOW.
What really upsets me is when some egomaniacal WS "pro" that does not post often , does not share opinion/ideas ready to jump and attack posters that do and discourage them from posting . And you should be upset too , domestic.

 

[Maverick74]

Quote from jeffm:



You also said if I could demonstrate double digit returns and a less than 5% drawdown, you would issue an apology for your typically insulting comments. I did better than that, showing audited numbers going back 7 years from a CTA with 40MM AUM. But of course you crawfished and instead accused the CTA of being a crook. How convenient.

I never asked you to pick a single fund out of 12,000 to back up your argument. Have you not heard of data mining? I asked you to show me an example of how YOU trade since YOU claimed you could make large returns with small drawdowns trading short gamma. So I asked you to give me a hypothetical position for all on the board to see, and you failed to do that. Instead you searched all the data bases, ignoring all the funds that blew up selling gamma and you found one, that's right, one fund that you believe backs up your claim. The problem is you have no idea how they trade or what they do. Very impressive.

You also said that 5% short-premo wipeout moves happen every day. I see 7 years of trades in the above record, including 9/11. Where's the wipeout?

That is not what I said. I said 5% moves happen every day. Hell, 10% moves happen every day. I never said every single 5% move wipes out a short gamma trader. It looks like your reading apprehension skills are on par with your understanding of options pricing. And btw Einstein, 9/11 wiped out a lot of funds including one Mr. Victor Neiderhoffer.

 

[Maverick74]

Quote from yip1997:

Mav,

Please forgive my ignorance. What is the main difference between a remote market maker and remote trader with haircut leverage?

What infrastruture do you need to do it at home?

Remote Market Makers are members of an exchange and on a seat and pushes quotes through the exchanges. A remote trader is just someone that trades from a remote location. Huge difference.