Vertical Spreads for Aggressive Growth

[Neoxx]

Quote from graemem:

Cache,

Do you enter stop losses for your spreads, or do you close if the spread hits a mental stop.

Am using TOS and they say they don't do stops on spreads.

Appreciate your thread, good stuff
Cheers

Actually, you can enter stop losses on spreads if you need to, just need to be a little more creative about it.

All you need to do is set up a conditional limit order...

On the trade page, in the order entry box click on Rules, and enter your conditions i.e. how you'd like your stop triggered. Then use the expected price tab to work out the price of the spread at your stop price and enter that as the limit order. May have to be a little conservative when placing your limit if you want to ensure a fill in a fast moving market.

If like me, your access to the markets is limited, this is a godsend.

Hope that helps.

 

[Cache Landing]

Quote from Neoxx:

Didn't realise you daytraded on the side. No wonder you're so good at adjusting

Are you using similar setups for your day-trades, and concentrating on similar sectors?

In part I do use similar setups for the daytrades. I've found that for swing trades the setups have to be much better. I'm usually not trying to grab a quick bounce with a credit spread. With an intraday trade I'm not as worried about getting faked.

 

[Cache Landing]

Sold some OIH AUG 135/140 bull puts at 2.10

 

[Neoxx]

Quote from Cache Landing:

Sold some OIH AUG 135/140 bull puts at 2.10

I've got the same spread open.

Am curious, what's your exit strategy on this one?

 

[Cache Landing]

Quote from Neoxx:

I've got the same spread open.

Am curious, what's your exit strategy on this one?

Ultimately I'm expecting 140 to hold with only temporary dips below.

My initial position is relatively small. If OIH drops to 130 I will roll out to SEP and down to 130. At that point I'm expecting IV to be very high. If we are right on the direction, I'm expecting about a 500bp IV drop. That should help me with a nice profitable exit.

 

[Cache Landing]

Today's Action

STO 2 OIH AUG 135/140 p @ 2.10

Year to Date P/L

Account Value: $14,049.50

YTD Gross P/L: 4,365.00

YTD Commiss: 553.50

YTD Net P/L: 3,811.50

YTD % P/L: 40.5%


It appears that I could've timed this better, but I'm still pleased with my entry. If I'd waited I'd have gotten about 2.50 for it, but I likely would've waited until it got closer to 130 and then opened the 125/130 spread instead. We'll see how it plays out over the next couple weeks.

 

[yip1997]

Quote from Cache Landing:

Today's Action

STO 2 OIH AUG 135/140 p @ 2.10

Year to Date P/L

Account Value: $14,049.50

YTD Gross P/L: 4,365.00

YTD Commiss: 553.50

YTD Net P/L: 3,811.50

YTD % P/L: 40.5%

Cache,

Did you check and see which one provides you a better return.

50%---FOTM/OTM
35%---ATM
5%---ITM (or simply long puts/calls single leg plays)
10%---CASH

Your return is already very impressive. I am just curious if you can improve the performance by changing the ratio.

 

[Cache Landing]

Quote from yip1997:

Cache,

Did you check and see which one provides you a better return.

50%---FOTM/OTM
35%---ATM
5%---ITM (or simply long puts/calls single leg plays)
10%---CASH

Your return is already very impressive. I am just curious if you can improve the performance by changing the ratio.

Yes I have checked to see which one has historically provided a better return. In my experience it is more about current market conditions than anything else. The quoted ratios work quite well in a certain environment. In others it might be better to focus more on other strategies. Admittedly I don't share all my thoughts/trades on here.

 

[yip1997]

Quote from Cache Landing:

Yes I have checked to see which one has historically provided a better return. In my experience it is more about current market conditions than anything else. The quoted ratios work quite well in a certain environment. In others it might be better to focus more on other strategies. Admittedly I don't share all my thoughts/trades on here.

I suspect:

FOTM/OTM is good for a steady up/down, or sideway environment
ATM is good for event play (like buying at low vol, and selling at high vol )
ITM is good for trending market.

Am I right? Too bad I can't check your historial return

 

[Cache Landing]

Quote from yip1997:

I suspect:

FOTM/OTM is good for a steady up/down, or sideway environment
ATM is good for event play (like buying at low vol, and selling at high vol )
ITM is good for trending market.

Am I right? Too bad I can't check your historial return

Mostly right, assuming we are talking only about credit spreads.