Vertical Spreads for Aggressive Growth

Quote from rallymode:

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I'm sure you've considered this but perhaps worth looking at the OTM debit spread for two reasons:

1) OTM vs ITM, you may get better fills on the OTM 60/65 Bear PUT spread. Of course, they are synthetically equivalent.

2) If you intend to aggressively leg the spread, long leg first, then the Bear PUT spread allows you to remain consistent with your bearish sentiment should you happen to be legged out i.e. left with just a long ATM PUT which is not a disaster.

MoMoney.
 
Quote from momoneythansens:



1) OTM vs ITM, you may get better fills on the OTM 60/65 Bear PUT spread. Of course, they are synthetically equivalent.
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I am sure you meant the 60/55 debit vertical. I am not willing to pay the 3.5 debit on the 60/65.

I am starting to think you are a big fan of these long ATM strike, add the short later plays. :)
 
Quote from rallymode:

I am sure you meant the 60/55 debit vertical. I am not willing to pay the 3.5 debit on the 60/65.
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Indeed.


I am starting to think you are a big fan of these long ATM strike, add the short later plays. :)
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Sure, if I have a strong directional conviction.

Might take a look at this on Monday :D
 
Quote from momoneythansens:


Might take a look at this on Monday :D
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Just dont forget my cut if you make any money. Or perhaps a discount on your seminar would also do. :D
 
Quote from rallymode:

cache,

one of the stocks on my radar. Thought, i'd share with the group.

wyhm6.jpg


I am looking at the SEP 55/60 Bear Call Spread. Currently, its going for $4 credit. Slightly ITM but awesome risk/reward. Breakeven at the green line. Nicely overbought due to recent analyst comments but sector still in trouble. Vols, near the high end. I hope i am not missing any pending news. If the market heads south over the next 3 weeks this should be a nice winner, even without the markets help, it might still come out ahead. Anyway, havent pulled the trigger yet but will be watching it closely on Mon/Tue. Ideally, it will pull back up to the $62 line where i might grab the 60/65s but we shall see as the risk might be too high with that one.

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Rally, you have far more experience with the markets and knowledge of fundamentals than I do, but here's my take on this one, from a purely technical standpoint.

After a 5-wave decline, WY recently printed an Adam and Eve bottom reversal at 55, which coincided with the lows from November '03 and May '04, and the monthly uptrend line from 1990 to present.

It failed 59 at the first attempt, then broke out in convincing fashion and ran up to the 62 resistance, before a pullback on declining volume.

59 forms the convergence of the double bottom neckline, an upslanting 50 SMA and the 50% fibonacci retracement, and as such should represent strong support.

What's more, the sector broke out of it's three month downtrend following a 2B bottom in July.

Personally, I would be inclined to go long at 59, with a first profit target at 62.4.

Then again, my track record leaves a lot to be desired! :p
 
neo,

all that theory made my head spin. Without turning this into a TA debate, i'd say that i am not a supporter of the TA movement. Basic stuff to identify some "probable" support/resistance price points, sure i will buy that but anything beyond that is, in my opinion, best suited for after the fact justification for trade entry/exit points.
 
Yeah, TA's not everyone's cup of tea, and many call it self-fulfilling prophecy.

Haven't got much of a head for economics.

Would much rather look at pictures :p
 
Rally,

I personally would go with the ATM long puts on this one. I see it stalling once it drops down to 59 (your green line), which is where my profit exit would be. I do think the long term picture is down for these guys, but not until they break below the 50SMA again.
 
Quote from Cache Landing:

Rally,

I personally would go with the ATM long puts on this one. I see it stalling once it drops down to 59 (your green line), which is where my profit exit would be. I do think the long term picture is down for these guys, but not until they break below the 50SMA again.
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Well, the reason they popped up over the 50 SMA is a big driver in the trade. I dont believe the move is sustainable, hence my bearish outlook. Though, SEP might be cutting it too short. I normally dont just play for a couple of quarters but you and mo may have convinced me on this one. Let's see what happens next week and how the vols start the week off.
 
Quote from Cache Landing:

I guess that was a little confusing. When I started writing the first post I realized that there would probably be a lot of people who would think that my actual account balance is 10K. Then they would spend their valuable time writing to me about how I should have a different strategy until I've built up more money. So I wanted to clarify that my actual account isn't 10K, I am just using that number as a place to start.

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Aggressive growth to many of the people that I advise in long term investing, is 20-25% a year. As far as this thread is concerned. I would be satisfied with 10-15% each month. If all trades worked out well in a given month I would likely get closer to 30% for that month. But if 100% of my trades worked out every month I'd just give everything up next year, retire, and move to my beach house in the keys. :D
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How could we calculate return rates without knowing how much initial capital to support the $10K nominal capital, particularly when dealing with trading size/ DD%/ heat? Just curious.
 
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