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SCI new york
Registered: Feb 2007
Posts: 479 |
09-25-12 01:42 PM
Thoughts on this aggressive strategy
Not sure if this would still be considered a vertical spread, but nontheless;
Sell OTM monthly call option
Buy ITM/ATM/OTM call option; which to buy depending on how aggressive you want to be.
Thoughts?
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1245
Registered: May 2012
Posts: 516 |
09-25-12 04:18 PM
I think your going about this backwards. You're looking for a cool option spread they might make money. For options, you need to have a thesis. I think the stock will go up, go down, do nothing. I think vol is too high, too low. The ATM vs the OTM are too high, too low, etc. Then look for a strategy to make money on your opinion.
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SCI new york
Registered: Feb 2007
Posts: 479 |
09-25-12 04:39 PM
Quote from 1245:
I think your going about this backwards. You're looking for a cool option spread they might make money. For options, you need to have a thesis. I think the stock will go up, go down, do nothing. I think vol is too high, too low. The ATM vs the OTM are too high, too low, etc. Then look for a strategy to make money on your opinion.
Thank you. Ok, what about this, same spread strategy;
Bullish on stock, vol i think is low, I think OTM are too high on monthly, ATM weeklys are high
problem is theta on weekly is high, underlying movement doesnt always cover loss in time. selling premiums have been more profitable short term, but still having bullish trend.
have had success on weeklys following trend but truth be told, plenty of times have been rocked the other way. looking for more balanced strategy.
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trader198
Registered: Mar 2010
Posts: 1217 |
09-25-12 05:52 PM
if you have a vision, can see the daily bar breakout before everyone does, buy OTM.
if you have a day trading vision, or minute bar, buy ITM and day trade Options (buy the one whose strike near to current market), do not buy too deep, otherwise some adversary happens, you lost big.
if OTM is just several cents, think it as buying a lottery, throw 10~100 contracts for a try, you may be suprised with unexpected huge Gain.
if DITM is too deep in the money, shy away or short it with no question asked, buy an opposite OTM to limit risk. just like you buy an expensive luxury house, do not forget about home insurance, otherwise loss is massive.
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SCI new york
Registered: Feb 2007
Posts: 479 |
09-25-12 06:24 PM
what about recovering a loss from a position that has gone against you? Its happened too many times as far as I'm concerned. Good entry setup, going with the underlying trend, stock gaps down premarket and option value crumbles. Obviously OTM calls drop more significantly, but ATM becomes OTM and gets wiped.
Whats the best way to recover the position?
frustrating part is when it all clicks, I've had huge gains, then bunches of small losses that all add up.
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MTE
Registered: Jan 2005
Posts: 3344 |
09-26-12 08:20 PM
Quote from SCI new york:
what about recovering a loss from a position that has gone against you? Its happened too many times as far as I'm concerned. Good entry setup, going with the underlying trend, stock gaps down premarket and option value crumbles. Obviously OTM calls drop more significantly, but ATM becomes OTM and gets wiped.
Whats the best way to recover the position?
frustrating part is when it all clicks, I've had huge gains, then bunches of small losses that all add up.
There is no way to recover a position. No such thing as a magic strategy that would make a loss go away. Any "adjustments" that you make are nothing more than a new trade and to "recover" the original loss the market has to cooperate with your new position.
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