Trading Long Straddles

Have to chime in here...paper trading is a great way to LEARN the bells and whistles of a trading program. HOW to do something...not the WHY of it. It takes so many trades...trial and error...to begin to intuitively understand the market and what you are trading. The P&L of course will always be bogus on the trading page but as long as you completely understand that then paper trading is a good way to learn.

I do use TOS and agree that their p&L layout is kinda stupid. I just do my own and not try and figure it out. However if you use the "alternative" layout you can get perhaps a clearer picture of how each trade is doing. Try that FV
 
Nice opinions and they run the gamut of different degrees of experience.

I accidently got into ETF's and have been looking them up. Other than the major ones. The biggest problem I find is that the cycle in a week is not really more than one strike. So one would have to trade for a portion of a debit spread, after allowing for cost and commissions. Just to be safer than doing stocks.
I've been actually trying to figure out my possible selling point on a debit spread. I suppose if you could rely on something, that was a profit, if not ALL the potential profit, it would be a good bet? Really, what I was trying to do, is get my TIMING right and at the same time, put in a SELL order early in the day and just leave it alone and see if it got hit, at the end of the day.
My nervousness comes from having some of my practice stock debit spreads surge and go through the sold side, while I was away doing other things. Not wanting to get assigned. So I kinda thought if I had a sell order in for a target within the debit spread range, it would enable me to trade stocks with debit spreads. I don't think the paper trading in TOS takes into consideration anything to do with assignment, and I can sure see myself being rudely surprised if I started doing it in cash. That said, I believe the OEX does get assigned as an index, though from what little I remember from reading it, the OEX was the only index to act so?
 
this is what is confusing me.. you say i'm selling a debit spread... doesn't make sense.. your putting on the spread for a debit.. or your buying a debit spread.. debit means its coming out of your pocket.. credit means your getting credit. in your pocket.. you sell credit spreads.. buy debit spreads..
 
Aaaah well! Sorry about that. As a beginner learning, my vocabulary may be found wanting. Yes the debit spread is one you buy with a debit to your account. A credit spread is one you Sell one side that is more expensive and end up with a credit to your account.

The way this novice remembers them is:

Debit spread, buy the expensive strike and sell the cheaper strike.
Credit spread, sell the expensive strike and buy the cheaper strike.

My own experience with credit spreads has been usually 6 strikes OTM or so. You don't want to get hit by index or stock. If you can find the premium to sell, for safety.
Debit Spreads I'm putting on in the nearest strike. You wanna get hit by the stock or index and go through your spread.
 
Well I'm cashed out ( paper trading ) of APA, DVN, CSCO,TWC UPL. Only thing I'm still holding in the August months is an ETP Call debit spread. That one will have to expire tomorrow and I'll watch what happens to it.

CURRENTLY holding:

TLM Sept PUT 12/11 at .35 cents cost
QQQ Sept PUT, single bet @1.49
IWM Oct Call debit spread 80/81 @.50 cents cost
EEM Nov. PUT debit spread 40/39.50 @ .20 cents cost


I learned a bit from the others. 1) I had to make a more comprehensive work sheet, to understand the trade and costs and profit calculations.

2) My method of making a TIMING decision didn't seem to work all that accurately. At least there was no instant gratification from it.

3) I'm rather thinking of going back to a day trading method and if it goes into the second day, using straight buys and taking the profit, and if it fails and I'm not allowed by pattern trader rules, to close it, same day, then change it to a debit spread maybe?

4) Did some looking at indexes and credit spreads, using weekly stuff expiration and my timing system. Bit hairy that, can't get far enough out, and the risk / reward seems highly disproportionate.

5) Forecasting direction seems to be getting more and more difficult?
 
Paper trading all, in TOS paper money.

EEM 10 Nov PUTS @ .20 cents 40/39.50
TLM 1 Sept PUT 12/11 @ .35 cents
QQQ 1 Sept 64 PUT @ $1.49 straight
IWM 10 Oct. 80/81 Calls @ .50 cents
ETP 1 AUG CALL 47.50/50
IYT 2 CALENDAR CALLS AUG/SEPT 90/90 @ 1.55
SPY 2 CALENDAR CALLS AUG/SEPT 140/140 @ 1.64

There really doesn't seem to be much predictability, on making debit spreads? So, I've been going out 3 to 4 months.

Trying some calendars to see if I can develop something faster working and remunerative. Most amateurs claim CALENDARS don't work well for them?
 
IWM made + $300 in paper money.

I finally learned that the TOS PAPER MONEY ( PROFIT LOSS column in the MONITOR section0, has to have the initial debit it cost to put on a debit spread, plus the cost of commissions ( .20 cents ) deducted from the profit it shows. To give you an actual profit figure. Now I know that, I can make more sensible decisions.
 
Looks like my two Calendars in IYT and SPY are both going to lose money. Disappointing that! I thought I had them figured, but apparently not. Chuck the CALENDAR trading then.

A losing QQQ PUT trade is going to expire today too. Looks like things revert to debit spreads, far out in months.

I kind of have spent the last month or two trying different stuff in paper trading in TOS. I'm kind of trying now to go into IWM the S&P 500 as it swings wider than apparently others, particularly indexes. With movement you can make something is the theory. At any rate figured out a scenario to try out. So next week, in we go using only IWM.
 
The win loss ratio on debit spreads for the IWM.

1 loss breaks even with 3 profitable trades. Wipes them out.
To win, the win loss ratio has to be four to one.
I was kinda thinking to enter the IWM with two debit spreads. But after going over this win loss ratio, I think it would be only one trade. Even if I did 10 contracts on the first trade and scaled in with a second trade at 5 contracts. The win loss ratio, makes that second trade iffy, and ups the RISK PROFILE too much. What alternative pray tell? The only way I can think of right now is go to one trade, and look for more profit by increasing the size, if the system timing proves correct.

JUST THINKING OUT LOUD HERE.
 
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