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Trading Long Straddles
- Thread starter falconview
- Start date
Well, nobody knows for sure. But it's my belief that people fear these "corrections" more often than they occur. You know what they say, economists have predicted 9 out of the last 5 recessions. If the market understated it, it would make sense to buy a "positve" edge lottery ticket with FOTM options. It's up to you to decide.
Well this novice contacted TOS help. Their answer was not clear enough for this dumb bunny. But I've been figuring it out this Monday morning on reading the Monitor page in TOS platform.
At any rate, I had not been putting enough information on my worksheet to go back afterwards and try to figure things out. This Monday morning, made a new work sheet and started off with a 10 contract IWM trade. Spent 45 minutes chasing the debit spread it went so fast and trying to watch live TOS and then put the trade on in paper trading TOS which has 20 min delayed prices is a confusing bunny. Finally got a paper trade for a .50 cent spread. Decided i didn't want to pay more than .50 cents.
So now I've written down on my worksheet the index price. Oct CALLS at .50 cents and deducted .20 cents round trip commission. Leaving me with a possible net profit of + $300 if I get the move in next three weeks. The vertical spread calculator says maximum profit on the spread is $100 a contract. Initial spread cost is $50 per contract. What I was trying to figure out was how much should I put a sell order spread in for, when it gets closer? That apparently would be .50 cents. Take off two cents to be more sure. My early sell order on the special day would be for .98 cents, is how I am now figuring it, for this novice. To prevent me going past my bought strike. Don't think it matters on indexes? But for stocks it would I expect be critical, or I could end up with stock? Will stick with indexes for the moment and see if I have this jigsaw figured out properly yet. Bit more of trial and error this month before I can move to cash trading. Some of my previous stock debit spreads exceeded the sold strike by quite a bit. Paper money didn't say anything about that, but got a funny feeling, I would get an unpleasant surprise if I did that with real money.
At any rate, I had not been putting enough information on my worksheet to go back afterwards and try to figure things out. This Monday morning, made a new work sheet and started off with a 10 contract IWM trade. Spent 45 minutes chasing the debit spread it went so fast and trying to watch live TOS and then put the trade on in paper trading TOS which has 20 min delayed prices is a confusing bunny. Finally got a paper trade for a .50 cent spread. Decided i didn't want to pay more than .50 cents.
So now I've written down on my worksheet the index price. Oct CALLS at .50 cents and deducted .20 cents round trip commission. Leaving me with a possible net profit of + $300 if I get the move in next three weeks. The vertical spread calculator says maximum profit on the spread is $100 a contract. Initial spread cost is $50 per contract. What I was trying to figure out was how much should I put a sell order spread in for, when it gets closer? That apparently would be .50 cents. Take off two cents to be more sure. My early sell order on the special day would be for .98 cents, is how I am now figuring it, for this novice. To prevent me going past my bought strike. Don't think it matters on indexes? But for stocks it would I expect be critical, or I could end up with stock? Will stick with indexes for the moment and see if I have this jigsaw figured out properly yet. Bit more of trial and error this month before I can move to cash trading. Some of my previous stock debit spreads exceeded the sold strike by quite a bit. Paper money didn't say anything about that, but got a funny feeling, I would get an unpleasant surprise if I did that with real money.
Pondering that IWM debit spread. I think the MONITOR page in TOS will only show as high as .50 cents profit for that spread, as they probably have deducted the .50 cents cost already? Which means my sell order would be around .48 cents I theeenk? Just have to watch it as it goes along over next three weeks and see if I have it figured right?
burn the paper trading bro.... you'll never trade like that in real life.. because its not real life... if your not an active participate in the market your not trading at all... all paper trading does is create illusions that is if your discretionary trading.. of course if your backtesting some mechanical signal trading or auto trading different story.. . all your going to do is create an illusion for yourself that you know what your doing... unlessy our using paper trading to get familar with your trading console .. ditch it! put your balls on the table.. trade very small realitive to your account size.. otherwise your wasting your time..
Appreciate your viewpoint. I have done it both ways many times. That's how come I'm down 30% on my portfolio. I'll just get comfortable with the debit spread and the TOS platform before I start with cash again.
Point taken the cash results are not realistic. Already know that.
But am getting a realistic grasp of what the debit spread does under different timing situations. It would seem the timing can be right, but the move not enough for the debit spread to work first time around, so basically confirming that one has to trade only with the trend. Steeper the trend the better.
Point taken the cash results are not realistic. Already know that.
But am getting a realistic grasp of what the debit spread does under different timing situations. It would seem the timing can be right, but the move not enough for the debit spread to work first time around, so basically confirming that one has to trade only with the trend. Steeper the trend the better.
Quote from falconview:
Appreciate your viewpoint. I have done it both ways many times. That's how come I'm down 30% on my portfolio. I'll just get comfortable with the debit spread and the TOS platform before I start with cash again.
Point taken the cash results are not realistic. Already know that.
But am getting a realistic grasp of what the debit spread does under different timing situations. It would seem the timing can be right, but the move not enough for the debit spread to work first time around, so basically confirming that one has to trade only with the trend. Steeper the trend the better.
by trading a debit spread like that your expressing this view.. the stock is going to go up faster then the options have priced in.. remember that saying... you can be right in options with direction and still end up losing money.. so your expressing a view on volatility and on direction in this case.. look up statistical correlation in relation to trend.. plus you always have to fall back on things are sometimes completely random.. and i try to align my views on volatility with my options trades first and formost.. because thats what your paying for... ask yourself.. is the realized vol going to be possibly higher then the implied in the options? look at historic/realized vs implied... find stocks the blow out their implied vols alot.. or if your a seller the opposite