Trading credit spreads

[Ironplates]

Anyone have experience selling credit spreads?

I ultimately end up being correct by weekly expiration where the spread would expire worthless, however, get really stressed about the risk parameters and either.

Problem: Wait too long to enter, and lose the time decay benefits,

or

exit too early without letting the spread expire worthless.

I am trading sometimes weeklys, 3-2-1-0 days before expiration on 5 or 20 minute periodicity.

The risk return parameters of the entire structure is really stressful. I really prefer 3 times benefit over risk, but find that almost impossible in OTM credit spreads.

Any feedback on how to better understand these things and reduce ignorance with more knowledge.

Question:

Where are proper entry points for these types of structures?

Is selling the high IV with the expectation of IV compression the game?

ie. sell the spreads After the EPS announcement or when the price action is resting after a large move?

TIA.

 

[options_fanatic]

Never hold till expiration. The negative gamma risk is too high.

This article has a good explanation:
https://steadyoptions.com/articles/post/general/why-you-should-not-ignore-negative-gamma-r86

 

[trend2009]

what is the credit spread you were talking about? treasury or option? and what is the symbol in IB?

 

[Ironplates]

what is the credit spread you were talking about? treasury or option? and what is the symbol in IB?

Equities in general, nothing specific.

 

[OTM-Options]

Anyone have experience selling credit spreads?

I ultimately end up being correct by weekly expiration where the spread would expire worthless, however, get really stressed about the risk parameters and either.

Problem: Wait too long to enter, and lose the time decay benefits,

or

exit too early without letting the spread expire worthless.

I am trading sometimes weeklys, 3-2-1-0 days before expiration on 5 or 20 minute periodicity.

The risk return parameters of the entire structure is really stressful. I really prefer 3 times benefit over risk, but find that almost impossible in OTM credit spreads.

Any feedback on how to better understand these things and reduce ignorance with more knowledge.

Question:

Where are proper entry points for these types of structures?

Is selling the high IV with the expectation of IV compression the game?

ie. sell the spreads After the EPS announcement or when the price action is resting after a large move?

TIA.

Complete rubbish. The OP obviously doesn't know his ass from a hole in the ground.

 

[Ironplates]

Complete rubbish. The OP obviously doesn't know his ass from a hole in the ground.

The reason for the post is to become less ignorant. however, not really sure if you are any more knowledgeable. Perhaps you can share with us your wisdom being that you appear to be so much more enlightened.

 

[OTM-Options]

The reason for the post is to become less ignorant. however, not really sure if you are any more knowledgeable. Perhaps you can share with us your wisdom being that you appear to be so much more enlightened.

You posted that you have some experience in trading Credit Spreads, if so could you explain this sentence?

"I really prefer 3 times benefit over risk, but find that almost impossible in OTM credit spreads"

It sticks out like a sore thumb and shows how clueless you are.

 

[Ironplates]

You posted that you have some experience in trading Credit Spreads, if so could you explain this sentence?




It sticks out like a sore thumb and shows how clueless you are.

Well then, provide the insight.

The experience I have had has been 80% positive across more than 15 trades, but, I am not convinced there is some ignorance lacking and am trying to get some more understanding which you may or may not have.

I may need to read some more "Coulda Woulda Shoulda".

 

[OTM-Options]

...........

The experience I have had has been 80% positive across more than 15 trades

................

...........
I really prefer 3 times benefit over risk, but find that almost impossible in OTM credit spreads.

.............

FYI ........ A quick look at the quotes on any option chain will tell you that you can't get a 1:3 risk/reward ratio with credit spreads. Yet after 15 trades you haven't figured that out and even post that you prefer those sort of returns.

!!!!! GIVE YOUR HEAD A SHAKE !!!!!

 

[Ironplates]

FYI ........ A quick look at the quotes on any option chain will tell you that you can't get a 1:3 risk/reward ratio with credit spreads. Yet after 15 trades you haven't figured that out and even post that you prefer those sort of returns.

!!!!! GIVE YOUR HEAD A SHAKE !!!!!

Those trades where not 3 times risk. If I alluded to such, then that was not the intent.

I am learning that paying 1 to make 9 on a 10 pointer vertical provides good risk return.
Also the OTM compress faster than ATM, especially the call side.

That direction, time and volatility must be considered as well as skew.

Also to take a different perspective to premiums and that a long call spread for 7 is like a short put spread for 3.

Because I like to look for entries at good support or resistance it appears buying ITM debit spreads or shorting OTM credit spreads will be good considerations to start with.

Next I will learn about "what is the appropriate time frame?"