SPX Credit Spread Trader

Quote from uglyboy:

RR -
The point I was trying to make is that ICs work fine as long as vol doesn't go up. The "advantage" is that you are being paid for a vol prediction (IV) that ends up being too high (i.e. greater than realized vol).

This has worked well (expectation of falling realized vols) and a time not to (expectation of rising vols). I'm also not trying to tell you to trade any way other than you see fit - each of us has unique skills and flaws. All I'm saying is that the math doesn't support ICs in last month's conditions.

Saddle up!
UB
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There is the RUB! We don't know when vol's will go up or down. Any "bet" we make is either a vol bet or directional bet. Perhaps next week will surprise us all and vols will revert to 10.

Of course math doesn't support IC's in last months conditions...nor did it support in 2005...but in 2005 it worked.
My point is learning as much as we can... when the math dosn't work then perhaps we can use our trading skills to adjust to the "new' math and make lemonade. Point being there is never the "perfect" time to put on the CS, however as coach says..good risk management can overcome a number of evils!
 
Quote from RichardRimes:

There is the RUB! We don't know when vol's will go up or down. Any "bet" we make is either a vol bet or directional bet. Perhaps next week will surprise us all and vols will revert to 10.

when the math dosn't work then perhaps we can use our trading skills to adjust to the "new' math and make lemonade.
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You're right, we don't know whether it will go up or down, but if VIX is 9, is it more likely to go down or up? If it is 100, is it more likely to go down or up? Probability mathematics always works - it doesn't predict any single event, just trends in groups of events...
 
Quote from uglyboy:

You're right, we don't know whether it will go up or down, but if VIX is 9, is it more likely to go down or up? If it is 100, is it more likely to go down or up? Probability mathematics always works - it doesn't predict any single event, just trends in groups of events...
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Thats exactly right...probability math does work...most of the time and that is why high probability credit spreads work...most of the time.
 
Quote from optioncoach:

Argus???

Not sure how that is relevant lol
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Well i didnt feel the need to elaborate but i see you are losing focus, Phil. Baby taking a toll on you? LOL jk

It is relevant in the context of your statements that the FOTM vertical is a good play when good risk management is employed. Stop feeding these clichés to the folks on this thread. LOL There is no such thing as risk managing a 20:1 r/r position properly. The best hedge is to not open the position at all. I am sure the argus guy thought his risk management was rock solid, just as you think yours is (no pun intended).

The most consistently profitable options traders i know of are also the best risk managers. They are able to extract the most profit for each unit of risk. By definition alone, the FOTM vertical gets excluded from the list of even viable strats. Allocating 20% of personal cash to FOTM verticals isnt called managing risk, it is called managing 20% of your cash recklessly.

Anyway, i am experiencing a dejavu, so i will stop. :D
 
Quote from rallymode:

Well i didnt feel the need to elaborate but i see you are losing focus, Phil. Baby taking a toll on you? LOL jk

It is relevant in the context of your statements that the FOTM vertical is a good play when good risk management is employed. Stop feeding these clichés to the folks on this thread. LOL There is no such thing as risk managing a 20:1 r/r position properly. The best hedge is to not open the position at all. I am sure the argus guy thought his risk management was rock solid, just as you think yours is (no pun intended).

The most consistently profitable options traders i know of are also the best risk managers. They are able to extract the most profit for each unit of risk. By definition alone, the FOTM vertical gets excluded from the list of even viable strats. Allocating 20% of personal cash to FOTM verticals isnt called managing risk, it is called managing 20% of your cash recklessly.

Anyway, i am experiencing a dejavu, so i will stop. :D
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I think Argus is wrong in his annual performance summary. He said -12.31% max drawdown, but the actual max drawdown should be -32% from Sep 06 to Nov 06. Just don't understand how NFA audits his record.

A record in Argus cannot be used as a proof that the strategy is bad. Look at Ansbacher's record
http://www.ansbacherusa.com/perform_ansbacher.htm

Of course, Ansbacher's record cannot be used to prove that the strategy is good.

Assuming you have no market bias, most strategies will lose money in this market. You got a perceived edge because of your market outlook, not because of your "better" risk/reward strategy. Can you use an example to show how a CTM vertical can be better managed in this market?
 
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