rd..where can I find the article...TIA donna
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Thanks for the reminder, been so behind in everything. I will print it out and devour it this weekend!
Phil
Phil
I am sorry but I do not follow the NDX at all and I can only give you a cursory answer which probably is not as helpful. All I can say is focus on support and resistance points and if the index is above resistance then the lliklihood for a continued move higher is much higher and your short strike could be at risk. The NDX is right now at 1631 and I do not know if 19 points is a big move or not in the NDX. I do not see any large surge in the next 3 days so you might be able to get some more time decay in to shrink it down or one good down day. Both the SP and OEX are above past resistance so some more upside move may be in the cards. Watch it closely and be ready to pull the trigger if the market surges.
I decided to place some bear call spreads today. Got the following filled:
1285/1300 DEC SPX bear call at $0.55
Then I decided to follow Coach on his trade:
1275/1280 Dec SPX bear call at $0.40
I'm just starting to take on Dec bear calls so I'll be looking to do more depending on what the market does.
1285/1300 DEC SPX bear call at $0.55
Then I decided to follow Coach on his trade:
1275/1280 Dec SPX bear call at $0.40
I'm just starting to take on Dec bear calls so I'll be looking to do more depending on what the market does.
Coach,
The reason it has been in a tight range this week is because 1635.74 is the high resistance for the last 2 years and it's approaching it, trading above it, everyday but never close above it. As soon as it closes above 1636, I have a hard decision to make. I know for sure that by monday if it doesn't reach it, I will make some profit out of it.
Either I will close or make the butterfly by getting the 1650/1640.
Coach,
I was thinking about making the BULL Spread at 1600/1580 to make some additional money in case it retraces. I was looking for a down day but I haven't got any so far.
Thanks
The reason it has been in a tight range this week is because 1635.74 is the high resistance for the last 2 years and it's approaching it, trading above it, everyday but never close above it. As soon as it closes above 1636, I have a hard decision to make. I know for sure that by monday if it doesn't reach it, I will make some profit out of it.
Either I will close or make the butterfly by getting the 1650/1640.
Coach,
I was thinking about making the BULL Spread at 1600/1580 to make some additional money in case it retraces. I was looking for a down day but I haven't got any so far.
Thanks
S&P clsoed at 1221, BELOW resistance which it has failed to hold again for the 5th day in a row. Seems there is not any significant strength to hold the gains as of right now so it might not hold by Monday. The longer we stay at this level the more theta you get.
Phil
Phil
....think you have me confused with someone else. I have no positions on the NDX! Not in a hurry to get a stomach ulcer lol.
Any comments I made were pertinent to YOUR position.
Momoney.
Any comments I made were pertinent to YOUR position.
Momoney.
Phil,
Your approach of simplicity to this question is slightly skewed from a statistical point of view... allow me to shed some light.
The term "out of" corresponds to probability, which is defined as a number from 0 to 1 inclusive, usually expressed as a fraction, which is the ratio of the number of chances of a specific event to the total number of chances possible. In our common day language, it is more commonly spoken as a percent between 0% and 100%, inclusive.
The term Odds is invariably mistaken for the word probability. In fact, in the statistics world we call it the 'slang' word for probability. Odds are expressed as the number of chances for (or against) versus the number of chances against (or for).
So, in your die example, since there is a total of six outcomes... we would say there are 2 outcomes against you (ITM) and 4 outcomes for you (OTM). Based on your analogy of a single outcome of a die ...
The odds in favor of you being ITM, would be 2:4
The odds against you being ITM, would be 4:2
The odds in favor of you being OTM, would be 4:2
The odds against you being OTM, would be 2:4
The odds in favor of you not being ITM would be 4:2
The odds against you not being ITM would be 2:4
The odds in favor of you not being OTM, would be 2:4
The odds in against you not being OTM, would be 4:2
I hope this gives you some ammunition to use with your kids next time they ask you a question. Just answer them in eight equivalent statements...
As for Probability... "2 out of 6" as described in Phil's example, lends itself to probability, rather than odds. 2/6 would equate to approximately .33 or about 33%. The problem here being... the die example assumes a constant distribution of events or an equally likely outcome of each event, rather than the Expected probability of the event, Mu.
Unfortunately, the distribution of success and failure of options prices is not evenly distributed. Moreover, it's not normally distributed either....
So in response to "rd's" question earlier.... more risk or less risk... indepent events, dependent events, mutually exclusive or not, is really beyond the scope our this forum.
In short... the risk is dependent, and the probabilility of success is inclusive of that risk. What I mean to say... is if you define the risk to be what your maximium loss could incur... (whether you account for both sides of the condor or just one), that total in $$ is defineable, (spread - credit). The direction for loss is directional... one way. Where as having two credit spreads (IC) in place... also has defined risk (spread - credit), but is bidirectional and has two possible failing outcomes.
Since the distribution of the option prices is not normally distributed... integrating the current market skew may yeild a better approximation than simple independent probability.
I would suspect (guessing) the expected probability of success (defining success to be OTM at expiration) whether single tailed or double tailed with respect to IC's would differ less than less than 5% from each other.
This sounds like a weekend project...
Hope this helps to really confuse you... that's what us Math people do... we just don't tell anyone.... job security.
Murray
Your approach of simplicity to this question is slightly skewed from a statistical point of view... allow me to shed some light.
The term "out of" corresponds to probability, which is defined as a number from 0 to 1 inclusive, usually expressed as a fraction, which is the ratio of the number of chances of a specific event to the total number of chances possible. In our common day language, it is more commonly spoken as a percent between 0% and 100%, inclusive.
The term Odds is invariably mistaken for the word probability. In fact, in the statistics world we call it the 'slang' word for probability. Odds are expressed as the number of chances for (or against) versus the number of chances against (or for).
So, in your die example, since there is a total of six outcomes... we would say there are 2 outcomes against you (ITM) and 4 outcomes for you (OTM). Based on your analogy of a single outcome of a die ...
The odds in favor of you being ITM, would be 2:4
The odds against you being ITM, would be 4:2
The odds in favor of you being OTM, would be 4:2
The odds against you being OTM, would be 2:4
The odds in favor of you not being ITM would be 4:2
The odds against you not being ITM would be 2:4
The odds in favor of you not being OTM, would be 2:4
The odds in against you not being OTM, would be 4:2
I hope this gives you some ammunition to use with your kids next time they ask you a question. Just answer them in eight equivalent statements...
As for Probability... "2 out of 6" as described in Phil's example, lends itself to probability, rather than odds. 2/6 would equate to approximately .33 or about 33%. The problem here being... the die example assumes a constant distribution of events or an equally likely outcome of each event, rather than the Expected probability of the event, Mu.
Unfortunately, the distribution of success and failure of options prices is not evenly distributed. Moreover, it's not normally distributed either....
So in response to "rd's" question earlier.... more risk or less risk... indepent events, dependent events, mutually exclusive or not, is really beyond the scope our this forum.
In short... the risk is dependent, and the probabilility of success is inclusive of that risk. What I mean to say... is if you define the risk to be what your maximium loss could incur... (whether you account for both sides of the condor or just one), that total in $$ is defineable, (spread - credit). The direction for loss is directional... one way. Where as having two credit spreads (IC) in place... also has defined risk (spread - credit), but is bidirectional and has two possible failing outcomes.
Since the distribution of the option prices is not normally distributed... integrating the current market skew may yeild a better approximation than simple independent probability.
I would suspect (guessing) the expected probability of success (defining success to be OTM at expiration) whether single tailed or double tailed with respect to IC's would differ less than less than 5% from each other.
This sounds like a weekend project...
Hope this helps to really confuse you... that's what us Math people do... we just don't tell anyone.... job security.
Murray