Vertical Spreads for Aggressive Growth

[Cache Landing]

Sorry I forgot to indicate the number of contracts for a $10K account.

2 RIMM
2 AAPL
1 GS
1 BBY
2 BSX
2 AMZN

This tied up $1990 and cost me $12.5 in commissions.
Year to Date P/L

Account Value: $9,987.50

YTD Gross P/L: -

YTD Commiss: 12.50

YTD Net P/L: (12.50)

YTD % P/L: -0.1%

 

[momoneythansens]

A few questions that some will be pondering:

1) What kind of position sizing approach are you taking? Are they all 1 lot spreads? Do you intend to scale-in/out?
2) How many issues do you intend to have positions in at any one time?
3) Presume these are all March spreads (45 days). How far out do you go when short gamma (min/max)?
4) How much of your account do you intend to have collateralized at any one point? How much powder dry etc?

I'm sure all will become clear as the journal unfolds.

Good luck.

MoMoney.

Quote from Cache Landing:

Today's Action
All Credit Spreads
Bull Put
RIMM 60/57.5 @ .70
AAPL 75/72.5 @ 1.10
GS 135/130 @ 1.00
Bear Call
BBY 50/55 @ 2.00
BSX 22.5/25 @ .70
AMZN 45/47.5 @ 1.10

Year to Date P/L

Account Value: $10,000.00

YTD Gross P/L: -

YTD Commiss: -

YTD Net P/L: -

YTD % P/L: 0.0%

 

[cnms2]

Cache Landing,

One more question: do you have a trading plan? Do you intend to hold your positions to expiration? Do you plan to close them based on position profit / loss and / or underlying price targets?

 

[Neoxx]

Quote from Cache Landing:


All Credit Spreads
Bull Put
RIMM 60/57.5 @ .70
AAPL 75/72.5 @ 1.10
GS 135/130 @ 1.00
Bear Call
BBY 50/55 @ 2.00
BSX 22.5/25 @ .70
AMZN 45/47.5 @ 1.10

Hi Cache,

As you know, I'm keeping a close eye on this thread, hoping to learn the art of effective credit spreading.

I looked through your plays but I don't understand all of them.

For my edification, would you mind explaining the rationale on a couple of those positions?

RIMM - To me this looks as though it has formed a doji/spinning top, on low volume at resistance. Are you anticipating that it will bounce back up from support rather than fall through?

GS - IMHO looks overextended. Are you getting in early, expecting it to bounce off 134, thereby killing some time in the descent?

BBY - Are you expecting this to fall through the two rising windows?

The decision on 2x2.5pt spread versus 1x5pt spread, is that largely dependent on the credit?

On a 0.30 b/a spread, where are you expecting to get filled?

Thanks again,
Neoxx

 

[Cache Landing]

Quote from momoneythansens:

A few questions that some will be pondering:

1) What kind of position sizing approach are you taking? Are they all 1 lot spreads? Do you intend to scale-in/out?
2) How many issues do you intend to have positions in at any one time?
3) Presume these are all March spreads (45 days). How far out do you go when short gamma (min/max)?
4) How much of your account do you intend to have collateralized at any one point? How much powder dry etc?

I'm sure all will become clear as the journal unfolds.

Good luck.

MoMoney.

Sorry, when I entered my post before I was doing something else at the time and got distracted.

As you can see I updated the post to show the lot sizes. These sizes are based on the amount of equity tied up by the position (as a percent). Obviously when the account is still small I won't be able to be really precise in regards to allocation. Yes these were all MAR spreads. I'll try not to go more than 45-50 days out or closer than 21 days for new positions. Theta is great the last few weeks but the credits generally suck.

I can't say that I won't ever scale into/out of a position, but it won't happen very often. An exception to this rule would be on the rare occassion that an OTM play becomes a good ATM play. I would then consider increasing the position. It will also be very rare that I leg into a position.

I'm going to try not to have more than 15 (maybe 20) positions going at one time. Usually when I have more than 15 it means that I wasn't picky enough. These first 6, I wanted to get going, so I wasn't EXCEPTIONALLY PICKY and didn't allocate as much as I normally would've. I wanted to get going on MAR positions but not get too tied up just yet because I've got about 20 more that I'm watching for just the right moment. That pretty much answers the collateral question as I will try to keep between 10-15% cash at all times. Any time that I go below that will hopefully be for less than 2-3 days. I want to keep enough dry powder around to hedge/reverse a position if necessary.

 

[Cache Landing]

Quote from cnms2:

Cache Landing,

One more question: do you have a trading plan? Do you intend to hold your positions to expiration? Do you plan to close them based on position profit / loss and / or underlying price targets?

Yes (and sometimes) to all the above. In other words, sometimes it will be scientific and other times a bit more artistic based on my opinion of the underlying.

 

[Cache Landing]

Quote from Neoxx:

Hi Cache,

As you know, I'm keeping a close eye on this thread, hoping to learn the art of effective credit spreading.

I looked through your plays but I don't understand all of them.

For my edification, would you mind explaining the rationale on a couple of those positions?

RIMM - To me this looks as though it has formed a doji/spinning top, on low volume at resistance. Are you anticipating that it will bounce back up from support rather than fall through?

GS - IMHO looks overextended. Are you getting in early, expecting it to bounce off 134, thereby killing some time in the descent?

BBY - Are you expecting this to fall through the two rising windows?

The decision on 2x2.5pt spread versus 1x5pt spread, is that largely dependent on the credit?

On a 0.30 b/a spread, where are you expecting to get filled?

Thanks again,
Neoxx

Really quick and dirty...
RIMM-I'm anticipating strong support at 60.
GS-Expecting a retracment, but not lower than 135. (as I looked at the chart again, it might make it down to 129. I'll keep my finger crossed.)
BBY-I don't think it has enough to get through 52. My break even is right at 52 if held to expiration.

Lot size is determined by how much equity is tied up. In time I will try to be well balanced bulls/bears.

I try to get filled just higher than the mark first. IF I get filled immediately, I'm usually disappointed because I probably could've gotten more.

 

[Cache Landing]

Whew...I must have been having a hectic day. I also typoed on the commiss. In considering the error, I will just go ahead and use ToS commissions. As this is not my real account, the orders are too small to get a good rate and will therefore be $2.95/contract until they qualify for better rates. (Unless someone would rather I used a different broker's commiss.?)

Thanks for the heads up Neoxx.

Cheers,
Cache
Year to Date P/L

Account Value: $9,941.00

YTD Gross P/L: -

YTD Commiss: 59.00

YTD Net P/L: (59.00)

YTD % P/L: -0.6%

 

[Cache Landing]

Well, I don't want to jinx myself, but we got off to a good start today. Specifically RIMM jumped higher (almost 10%) on patent issues getting resolved. A little disheartening since, for those familiar with my other posts, I was forced to exit a sizeable FEB ATM bull put spread a little bit ago. What can I say, I got spooked.

This is a prime example of why I try to shy away from companies that have litigation concerns. It looks like RIMM is almost in the clear though.

For those following this, I broke another one of my rules and got into AMZN. The rule I'm referring to is to stay away from earnings announcements. AMZN is set to release earnings tommorrow. They will not have the aid of a tax benefit on this years numbers (as compared to last years) and christmas season is very important to their yearly EPS. We'll see how they do. I'm going to be really cautious on this one.

Cheers,
Cache

 

[Cache Landing]

I'm really keeping an eye on PALM and TXN right now.

TXN--short term support likely at 28, but more importantly I'm anticipating a very key resistance on a weekly chart at 34.5-35. This resistance was also demonstrated in the short term.

PALM--Right at a key resistance (40-41). A lot of people think highly of this company right now and the relative strength is super high. It is likely if it breaks there will be some short covering and 40 will become the new support. I'm looking for a drop back to the 20 SMA followed by a strong bullish effort.