SPX Credit Spread Trader

TID BIT on SHORT STRADDLE CREDIT SPREADS TIMING

Picked up a tidbit last midnight browsing SHORT STRADDLES on the internet. It said the ADX is a good slow line for putting on SHORT STRADDLES. When the slower ADX starts to go down after a trend, the price action of the underlying is sideways, probably choppy. You can play SHORT STRADDLES. Just tried it on the 10 day and 5 day hourly chart. Works better on the 5 day, as I'm trading WEEKLIES.

I found that interesting as the DMI is probably my most favorite computer indicator. I had not however thought of the ADX having any useful properties before. So this is new to me and looking at it, I can see indeed, you could certainly play SHORT STRADDLES using the descending ADX, or it going sideways.

At least this amateur novice thinks so? Will paper trade it on memo paper for a week or so and see how it bears out.

Golly gee whiz! In another week I'll be ready to try my hand at a TIME SPREAD! ( grin! )
 
Open Interest as a target for expiration in the weekly OEX index.

Thought I would see where the expiration number will be for today?

Somebody once on the internet said that the expiration number gravitates to the most OPEN INTEREST, or largest.

I remembered that, despite having fewer brain cells in my old age.

So the OPEN INTEREST in CALLS largest is at STRIKE 505 in the OEX and in the PUTS is at 470 OEX in the PUTS.

Which would it be? I suspect it is going to be neither and probably more around 495.
88888888888

In the meantime, yesterday's learning SHORT STRADDLE made overnight + $325 gross profit on 2 options, the PUT and a CALL.
Thanks to the teaching Guru 'Trade Journal' expertise.
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Now we see if the index will continue to behave the rest of today and give me a profit in the BULL PUT CREDIT VERTICAL SPREAD? A very bad bet and a mistake at the time.
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What am I missing here (on top of all the other things) with the OEX and NDX. If you look at the percentage change say today for both of them from 10:15 to 11:30. Both down .6% equally. So if the NDX index is approx 4 times that of the OEX, isn't that where my 4 times comes from? Are you saying that there are times when the OEX makes a 10 point move, the NDX could make a 90 point move?
Thanks Michael
 
Yes! You got it! It is all in the scale on the side of your chart. Different scales. Same overall chart pattern, but you have a bigger magnified scale on the NDX.

That at least is my impression. I haven't delved into it, as I see no difference in profits whether trading one or the other.
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How did you do with your paper trade Vertical BULL PUT CREDIT SPREAD?

With half an hour to end of day. I believe I have made mine?

My Vertical Bull Put Credit spread returned a NET of +$1590
My Short Straddle credit spread returned a net + $265.
For a total for the week of net + $1855.

I believe I will trade a SHORT STRADDLE credit spread next week in my TOS web based paper money account. I figure I can do at least one such trade a week and on occasion two. Will if the margin allows move up to 5 contracts. I will also stay right now at 50 contracts on the VERTICAL BEAR CALL credit spreads. Got to make back the money I lost two weeks ago.
The commissions on the STRADDLE are $60. On the 50 contract Vertical are $160.

The chance of LOSING on the BEAR CALL VERTICAL is 7% possible. The chance of losing on the BULL PUTS Verticals is 40%. So you can guess I will not be doing the latter in the new system. Lucked out this week, and hopefully have learned my lesson?

Going to take me about ten weeks to get back even. After that ALL GOING WELL will move into real CASH and start off with $5000 for Vertical credit spread and probably the same amount if the STRADDLES work out, the same.

Next week want to study the STRANGLES and how they work?
 
Falconview:

I could see you made multiple posts. I have to focus on few things in markets. Will read and check later today. I would watch the short straddle life (the one currently at the money) until the end. I would also watch the one due to expire next week (same strike).

If a last minute rally takes place, you can try to watch what happens.

Got to go. The last 20 minutes before the bell are important. Bye now.
 
Quote from falconview:

Trading Journal and Cache Landing

It is after midnight and I am just reading the last couple of blurbs of my lessons. This doesn't seem like option 101 anymore. It more feels like software engineering classes.

I'm glad Trading Journal qualified it, with this "will come over TIME". Ha! Ha! Ha!

a) I've got the SHORT STRADDLE to fully understand?
b) The TIME SPREAD to understand
c) The two EDGES or so, of Cache Landing. Not so much the EDGES but the relationship between them and how you apply them.

Being a simple country yokel, I kinda have to get one thing down good, before going to the next.

Let me ask this? For Trading Journal

What is the best moment in TIME, or index movement to place a Short Straddle? From the conversation on here, I'm getting the feeling that a pause, or reversal of trend? Won't know until I try it a few more times, I can see.
I see you mentioning reversals and also reading the current level of Volatility from the option chain. That is giving me some ideas.
I was thinking a reversal will give you an altering situation in a SHORT STRADDLE, in that TIME DECAY or THETA will occur in whichever is OTM. The volatility will collapse premium of the side going to go ITM. I sort of am trying to catch a cloud of smoke here. In essence I'm going to get a profit by declining premium on whichever goes OTM and also going to get a premium advantage by collapsing volatility. Then I can buy back. It is however a fleeting seemingly moment to grasp that profit?

I'm not going to progress to the TIME SPREAD yet, until I understand the profit angle of this SHORT STRADDLE properly for ACTION and application.

My intitial thought was you watch the total credit you collected, when you sold the two CALLS and PUTS at the bid Then you watch the premiums of the ASK prices to see when they differ and are LESS in total than what you sold them for and buy them back. I vaguely understand that the TIME DECAY, or THETA will help and the collapse of Volatility of the premium collapsing will also help to achieve this profit goal. It is the question of TIMING.
Thinking about the cost of the difference in BID and ASK or market maker cost doesn't seem productive, when I'm really looking to see the TOTAL of the two sold options at the BID are greater than the two totals of the ASK. The difference is when I can buy them back and show a profit and clear my expenses. There has to be a moment in the movement of the index when this occurs? What is it?

From your chat I get the impression this is just at a reversal of index movement? I will figure it out of course by trial and error, but it would be faster if you just said so. Or described your moment in the TIMING of the INDEX for placing the SHORT STRADDLE. I will check that Volatility as well of the premiums and see what they tell me in identifying the moment in TIME when I should be BUYING BACK to make my profit.

Now I feel like STANFORD as a dog worrying a bone! ( grin! )

I understand the profit of the SHORT STRADDLE is about the effect of TIME DECAY, or THETA and of VOLATILITY of collapsing premiums. At least I think I do?

Interesting stuff, definitely not Options 101.
More...

Falconview:

1. Let me give an anology. Imagine an car insurance company. The best situation for a car company is that they sell insurances to all cars at a given moment, and one second later all the cars are not driven at all end expiration plus one second. Think about it again.

The equivalent of it in the stock market is that the stock market does not move, while time moving. Selling a straddle is insuring against both a rise in price, and a decline in price. Your best scenario is that nothing happens, and you wait until the end.

2. The market timing models are not about the options, they are about timing the stocks. As I wrote before I included them to say that I believe I have an edge in direction, but the other problems may damage an edge, and that those problems are the trader. Review the post in which I discuss this aspect.

3. When I read your posts, I got some statement that you indicate you understand something important. At the same time other statement, written in your wording, put doubts on whether you fully understood.

4. With respect to what I see, it is not something that I can describe it in the sense you seem to think it is. It is an analysis, and not an ABC type of thing. It can be taught, but like other things it needs time, effort, and other things.

5. It seems to me that you are fighting with the BID/ASK spread. One can reduce the cost of the bid/ask spread, but the money comes from time, and correct analysis of underlying and strategy development and implementation.

(This post is not edited as I am in a hurry-- again).
 
Quote from falconview:

TID BIT on SHORT STRADDLE CREDIT SPREADS TIMING

Picked up a tidbit last midnight browsing SHORT STRADDLES on the internet. It said the ADX is a good slow line for putting on SHORT STRADDLES. When the slower ADX starts to go down after a trend, the price action of the underlying is sideways, probably choppy. You can play SHORT STRADDLES. Just tried it on the 10 day and 5 day hourly chart. Works better on the 5 day, as I'm trading WEEKLIES.

I found that interesting as the DMI is probably my most favorite computer indicator. I had not however thought of the ADX having any useful properties before. So this is new to me and looking at it, I can see indeed, you could certainly play SHORT STRADDLES using the descending ADX, or it going sideways.

At least this amateur novice thinks so? Will paper trade it on memo paper for a week or so and see how it bears out.

Golly gee whiz! In another week I'll be ready to try my hand at a TIME SPREAD! ( grin! )
More...

That sounds good. In relation to what is next, I would also consider working on strangles first because they are immediate cousins of straddles (a straddle is just a particular case of strangles). Overtime you would also realize that most/all technical indicators say/sing the same story-- what is said in one is also said in an other but it may not be visible to all observers.
 
Quote from Stanford:

Falconview, hi from the worrying dog!
You might have missed my question on the OEX compared to the NDX, where you said the NDX was rougly equivalent to 10 times the OEX, but that is not correct is it? seemed more like 4 times or so to me. Doesn't that make my 200 point OTM spread more like a 50 point spread in the OEX. How much more safety is built into that compared your OEX 25 points OTM?
If I were to stick with the 200 OTM NDX bear call spreads that seems really safe, doesn't it?
Muchas gracias, Miguel
More...

Stanford:

1. I think you are right in your comparison of NDX and OEX. I had noticed it in one of Falconview's posts but I forgot to mention it.

2. Is your name Miguel or Michael? I am guessing that when an American ends in a spanish speaking world, he "becomes spanish by name".

3. From your posts, I am sensing that you may be a man of few (but very solid) words.

4. What do you trade or want to trade? Do you have particular objectives you want to meet? I know Falconview was aiming at doubling his account, and I noticed he wrote about it less after I made a post in which I gave numbers based on the straddle to show the maxi returns one can expect without leverage, but I am not sure whether or not that post is related to the less talk about the doubling of of the account.

5. There is one subtle thing they do not tell you about adjustments. For instance, the probability of making an adjustment is far higher than the people may have told you. Do you want to know the number? I do not think that they hide it from people, but rather they do NOT realize it themselves. There is a fundamental contradiction in the talk about adjustment.
 
Trading journals,
My name is Michael, but for falconview living in Belize, I usd the spanish version.

You are very insightfull about me being a man of few words, and I am glad you might think the ones I use are solid!

I do not trade at all, just looking at the possibility after hearing a friend who traded conservative credit spreads for a very nice return. I am tired of the financial planners and investment people not doing very much for me over the years and want to learn myself. If I was able to get a return of 25% per year, I would be a happy man.

To me, the biggest part of doing this conservatively is the admustments when it starts to go the wrong way. I would love to hear your comments on the monthly cash through options site, as they seem to have the closest model (though not as conservative as I would like) to what I would like to accomplish. They do quite a few adjustments, and I am thinking of opening a small auto trading account with them to see what happens.

I am not American, but Canadian (your friendly neighbours to the north)

Thanks for taking the time here to explain to falconview (and therefore tomyself as well). I am not close to his level of understanding yet, but each time I read something, I am picking up more.

Take care, Michael
 
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