Vertical Spreads for Aggressive Growth

[Cache Landing]

Quote from Cache Landing:

This one has been a hard one to forecast because of the uncertainty about the fed policy. I'm getting the feeling that a couple more interest rate hikes have already been priced into the market. If the fed stops raising rates though, we will see a really fast move upwards.

Judging by today's reaction to some relatively weak news, it appears that I might have been wrong about the market already pricing in additional rate hikes. If all it take to get the market moving down is a good housing number and a slightly lower initial claims number, the market may have infact priced in an early end to the rate hikes.

This makes me more uncertain about getting into that bullish SPX spread, but I want to get in for APR and I don't know that I have time to sit around and wait for next tuesday to roll around. I'll see where we are at toward the end of the day today, and make my decision then.

 

[ChrisM]

Quote from Cache Landing:

Judging by today's reaction to some relatively weak news, it appears that I might have been wrong about the market already pricing in additional rate hikes. If all it take to get the market moving down is a good housing number and a slightly lower initial claims number, the market may have infact priced in an early end to the rate hikes.

This makes me more uncertain about getting into that bullish SPX spread, but I want to get in for APR and I don't know that I have time to sit around and wait for next tuesday to roll around. I'll see where we are at toward the end of the day today, and make my decision then.

I trade options (among many other reasons) to not getting concerned about such issues. And - I always place the best trades when overall maket sentiment is exactly opposite at the moment.

As for APR - most of my profits are already taken and vola is low. I know I trade longer time frame, but my picture tells me that if you miss first week after previous expiration... you`d better wait for some news/vola jump, otherwise...no.

 

[Cache Landing]

Quote from Cache Landing:



Today's Action

Sold 4 DELL APR 27.5/30 put @ 1.10

Year to Date P/L

Account Value: $10,108.00

YTD Gross P/L: 210.00

YTD Commiss: 102.00

YTD Net P/L: 108.00

YTD % P/L: 1.1%

Decided to go ahead and buy back the DELL APR 30 shorts because I have made most of the profits really quick on this one. I think I can better utilize the money if I free up the margin. I'm leaving the longs because they aren't too far OTM and any correction will let me make back some money on them.

 

[Cache Landing]

Quote from ChrisM:

I trade options (among many other reasons) to not getting concerned about such issues. And - I always place the best trades when overall maket sentiment is exactly opposite at the moment.

As for APR - most of my profits are already taken and vola is low. I know I trade longer time frame, but my picture tells me that if you miss first week after previous expiration... you`d better wait for some news/vola jump, otherwise...no.

This is the first week after previous expiry we are in one of the 5 week months. That is why I am still considering trading it. I will admit though, that I have a little bit different opinion than many people on ET about how far from expiry to open a position.

[edit] Also, I don't trade options as a non directional strategy, or to avoid having to judge market sentiment. I think that trading a just as much an art form as it is a science. All these things contribute to the art. One day I hope to be able to aspire to the lofty realms of an "artist" in that sense.

 

[ChrisM]

Quote from Cache Landing:

I will admit though, that I have a little bit different opinion than many people on ET about how far from expiry to open a position.

OK, what`s the opinion ?

 

[IV_Trader]

Quote from Cache Landing:

This is the first week after previous expiry we are in one of the 5 week months. That is why I am still considering trading it. I will admit though, that I have a little bit different opinion than many people on ET about how far from expiry to open a position.

I'm with you on this one (that's a first) , EVERY week has different dynamics , espesially when it's comes to position of event date vs. expriration .

 

[Cache Landing]

Quote from ChrisM:

OK, what`s the opinion ?

In a nutshell, most people that I talk to would rather open a vertical or IC with about 6 weeks to expiry. I would rather open them immediately after the previous expiry if possible. This puts me 4-5 weeks from expiry.

They argue that you get a better premium if expiry is a bit further away. I argue that it leaves more room for error in directional forcasting and that it makes for only 8 trading periods during the course of a year, instead of 12. This forces them to stagger their money between months and hold large cash positions for extended periods. With an additional 4 trading period each year, the compounding gains make up for the lower premiums, and the shorter time periods leave more room for error. Also, I am only in a position when the effects of theta decay are the strongest.

That's not to say that I never put on a longer term position though. I simply prefer the shorter term.

My strategy doesn't leave much room for indecision though.

 

[Cache Landing]

Quote from IV_Trader:

I'm with you on this one (that's a first) , EVERY week has different dynamics , espesially when it's comes to position of event date vs. expriration .

Don't judge so quickly, you might change your mind after reading my opinion above. LOL

 

[ChrisM]

Quote from Cache Landing:

In a nutshell, most people that I talk to would rather open a vertical or IC with about 6 weeks to expiry. I would rather open them immediately after the previous expiry if possible. This puts me 4-5 weeks from expiry.

They argue that you get a better premium if expiry is a bit further away. I argue that it leaves more room for error in directional forcasting and that it makes for only 8 trading periods during the course of a year, instead of 12. This forces them to stagger their money between months and hold large cash positions for extended periods. With an additional 4 trading period each year, the compounding gains make up for the lower premiums, and the shorter time periods leave more room for error. Also, I am only in a position when the effects of theta decay are the strongest.

That's not to say that I never put on a longer term position though. I simply prefer the shorter term.

My strategy doesn't leave much room for indecision though.

Let`s add another one then

I think debates that 6 weeks is better than 4 etc. are just misunderstandings. Why ? The answer is simple: it all depends on your strategy. I use to sell S&P options about 100 handles OTM about 4 weeks before exp. in my previous program because strategy was different and it worked that way. Now I sell earlier and much closer, as strategy is different - and I usually don`t hold them till expiration. But if someone shows me good plan of selling them 2 days before exp with sound defense strategy I don`t have a problem with this.
Such disputes are kinda "better trade silver than gold". Even if true, being still another exception confirming general rule.

 

[Cache Landing]

Quote from ChrisM:

Let`s add another one then

I think debates that 6 weeks is better than 4 etc. are just misunderstandings. Why ? The answer is simple: it all depends on your strategy. I use to sell S&P options about 100 handles OTM about 4 weeks before exp. in my previous program because strategy was different and it worked that way. Now I sell earlier and much closer, as strategy is different - and I usually don`t hold them till expiration. But if someone shows me good plan of selling them 2 days before exp with sound defense strategy I don`t have a problem with this.
Such disputes are kinda "better trade silver than gold". Even if true, being still another exception confirming general rule.

agreed