Thanks Andy...I give you an A for creativity...I've never heard of a PREemptive hedge
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
RD... if you don't mind my asking...did you do deep in the money PUT or CALL credit spreads in GOOG and CME...also Coach I know you did GOOG..the reason I ask is that for Dec I decided to do a deep Put spread on CME as I have been very interested in it for some months. On Fri i did a 360/350 spread and received a nice credit for it..its now at 390 so feel reasonably safe given the uptrend in the mkt...I know credit spreads on individual stocks are not something you can do monthly or without a great deal of caution...what caused you (both) to stop?
Quote from rdemyan:
I've posted here before on a worse situation that I had in July. I made tons of mistakes and the worst of all was not getting out with the loss before the weekend. Worst weekend of my entire life. Also, at that time, I never had plans in place for getting out of my credit spreads. So when I had to, I didn't really know what I was doing.
Anyway, depending upon the size of your loss, it might take some time to get over this. I know I traded in August, but was so jumpy that I overadjusted and had a small loss for that month.
I think it is smart to only trade the SPX or something similar in terms of being slow moving and lumbering. I previously did credit spreads on Google and CME (I don't need to say much more; just look at where both of them are now) and the losses from those two were fairly large.
One thing I did that helped me was I placed trades in September, October and November (except for the Nov call spread) that were more OTM than Coach. The thinking was that if the market moved against me, I could watch Coach adjust first so I would get the benefit of his analysis. It meant lower premiums, which I've learned to live with. After that July fiasco, I'll trade money for more tranquility any day.
However, lately I've started to take on more risk and it resulted in a lower profit for November. For me at least, it's a constant battle to fight greed and even more importantly, complacency.
Best of luck to you.
Well Donna, think about it. If you want to put on a hedge, you can wait till the market gives you no choice (the hedge will be expensive) or you can put on the hedge when you absolutely don't need it (much cheaper) like I did today. I have not backtested/compared the two approaches. It's quite possible that putting on a hedge only if needed yields better over time... don't know.
Quote from DonnaV:
Thanks Andy...I give you an A for creativity...I've never heard of a PREemptive hedge
Last year I did deep OTM put ratio spreads on GOOG and collected premiums month to month. Was quite easy with GOOG up all year long. If GOOG moved lower I simply rolled the ratio spread into a bear put spread and took off the large risk. I prefer the credit spreads due to the lower margin requirements (i.e. no naked options).
Predominately in closed-end funds which pay monthly dividends. I have funds with municipal securities, corporate bonds, floating-rate loans, REITS, preferred stocks, convertible securities, MBS, private loans, treasuries and international bonds. The diversity takes a lot of the risk out of share price risk and lets me just focus on receiving my stream of income. I have a bunch of criteria but basucally I look for at least 6% yield, monthly dividends and trading at a discount. All that monthly income is good for the portfolio and the gains and losses in the CEF share prices pretty much cancel each other in most cases, but usually add another 1 - 3% on top of the 6% yields. I leave a portion in cash for adjustments and other debit positions and some in t-bills, although I am not in t-bills right now. My credit spreads margin ranges from 30 - 50% of total capital depending on how I feel (this thread covers one of my accounts). The monthly income from the CEFs acts as a nice hedge and boost of income and are used as margin to back up the spreads for the most part (50% of stock values, 100% of cash and 90% of t-bill value can be margined for credit spreads).
Phil
Phil
At the time they were place the spreads were deep OTM. Volatility is what caused me to stop. It only took two days for CME to rise over 30 points back in early June. I made the mistake of adjusting and tripling the number of contracts in order to maintain the credit. Stupid, stupid move.
I don't even remember Google that well. That was back in April/May. But again, too volatile for credit spreads IMO.
I don't even remember Google that well. That was back in April/May. But again, too volatile for credit spreads IMO.
sooooo you were doing BEar call spreads?
Your option buying power (which also includes your margin amount for selling spreads) will take into account stocks you own in your portoflio. So if you bought $100,000 of closed-end funds with all your funds, then your option buying power should be $50,000. OX and ToS both do this automatically within their margin and compliance departments. One way I see it clearly is that my option buying power is much higher than my cash position because it is counting margin against stocks and/or t-bills.
Phil
Phil