Vertical Spreads for Aggressive Growth

ryank · Aug 19, 2006

I did put on a very small XEO position on Friday. I got filled at $2.50 on an ATM 600/605 bear call spread. Of course the index ran up on me right after I was filled. I haven't done an ATM spread and wanted to try one out to see how it reacts compared to a CTM spread. Any tips you guys want to share (other than this may be a boneheaded position I got myself into

).

Cache Landing · Aug 21, 2006

Today's Action

BTO 2 SPX OCT 1240 p @ 7.8

Year to Date P/L

Account Value: $14,851.50

YTD Gross P/L: 5,480.00

YTD Commiss: 628.50

YTD Net P/L: 4,851.50

YTD % P/L: 48.5%

momoneythansens · Aug 21, 2006

Quote from ryank:

I did put on a very small XEO position on Friday. I got filled at $2.50 on an ATM 600/605 bear call spread. Of course the index ran up on me right after I was filled. I haven't done an ATM spread and wanted to try one out to see how it reacts compared to a CTM spread. Any tips you guys want to share (other than this may be a boneheaded position I got myself into ).

50% probability of doubling your money. Perceived higher probability if you lend credence to any TA that led you to take this position. Not that bonehead IMO

You're slowly moving towards one particular logical conclusion.

Personally, I find it difficult to justify positions where you can lose more than you make. *shrugs* This just about makes the cut!

It's much more feasible to hedge this position if desired due to the risk/reward balance.

The only question mark is pertaining to whether we pause before continuing up to re-test highs earlier in the year but that is a matter for your directional forecasting skills.

Good luck.

MoMoney.

rallymode · Aug 21, 2006

Quote from momoneythansens:

It's much more feasible to hedge this position if desired due to the risk/reward balance.

mo,

i'd be really surprised if i saw you actually hedge a 1:1 r/r credit spread. :eek:

momoneythansens · Aug 21, 2006

Quote from rallymode:

mo,

i'd be really surprised if i saw you actually hedge a 1:1 r/r credit spread. :eek:

LOL. Ironically perhaps, it's more likely that I would versus hedging a 10:1 credit spread. Is there method to the madness? Knowing me, probably not.

rallymode · Aug 21, 2006

Quote from momoneythansens:

LOL. Ironically perhaps, it's more likely that I would versus hedging a 10:1 credit spread.

How about hedging the risk of the hedge with yet another hedge?

How does it all end? - With snakes on a plane.

Cache Landing · Aug 23, 2006

Quote from Cache Landing:

Today's Action

BTO 2 SPX OCT 1240 p @ 7.8

When I opened this position I expected a quick drop to 1280 at which time I'd planned on selling some SEP 1260 puts to get the diagonal cheap.

I'm starting to think that we are just going to bounce around between 1280 and 1310 through SEP expiry. If that's the case I don't have any chance of hitting the profit zone on that diagonal and the most I can hope for is about a 100bp jump in vols. Not worth carrying the position.

In the end I've decided to simply take profits on any drop tomorrow morning. Given the bullish sentiment in the market I don't think I should have any problem getting a good fill.

rallymode · Aug 23, 2006

cache,

this market reminds me of late april early may when we used each and every reason to rally. Those with patience got rewarded nicely.

Cache Landing · Aug 23, 2006

Quote from rallymode:

cache,

this market reminds me of late april early may when we used each and every reason to rally. Those with patience got rewarded nicely.

I think you're right, but I didn't open the long puts with the intent of holding them naked for the next 3 weeks, which is when I think patience will start to pay off.

When the patience you speak of starts to pay off though, it will likely be very quick. I've drawn three different possible trend lines and all of them converge at 1300, which is inherently a point of resistance. If we start running down, next stop 1240 by the end of OCT. JMO

rallymode · Aug 23, 2006

Quote from Cache Landing:

I think you're right, but I didn't open the long puts with the intent of holding them naked for the next 3 weeks.

Not a fan of buy and hold i see. You like to $%#^ them and leave them LOL