I could not agree more with Phil's last statement. In the past, I have traded credit spreads and iron condors on individual stocks. While I often did make money, I also suffered some substantial losses.
This included deep OTM credit spreads, which would bring in .20 credit. I would open several each month on differing stocks. Often all expired worthless and I'd return 10% - 20%, but then there would be a month when one stock imploded. I had this experience with companies like Schnitzer Steel, Net Flix, Career Education, etc. The trouble was that these stocks would gap and keep breaking down. One loss would literally wipe out a few months worth of gains.
The indices provide considerable protections against gaps and breakdown. Sure, they can gap but they tend to be smaller in nature than more volatile stocks. The indices also trend down, but they tend to pause at areas of support rather than slice through them. The bottom line is that it is possible to adjust the occasional loser to minimize the loss. Often, you can still eek out a small profit.
I still trade individual stocks, but I do not use the same strategies that I use for the indices. They are different games to be played by different rules in my book.
