Cman: I think we're saying the same thing in different ways. A "losing" Bull Put Spread to me is when the stock falls below the upper strike, thereby going In The Money. The Rapid Time Decay then causes the Bull Put Spread to get more expensive to Buy to Close (as the price of the Spread approaches $1.00 at Expiration), thus rapidly increasing your loses. I don't like closing a Credit Spread as soon as the underlying stock goes In The Money, because if there's enough time left before Expiration (more than 30 days), and the trend is still in place, the stock will many times go back Out Of The Money and I can still win on the trade. I think you're also referring to the risk of "Early Assignment". As long as the Option you sold still has some Extrinsic Value, it's more profitable for the owner to sell the Option, rather than Exercise it for stock. It's that Extrinsic Value that rapidly declines during the the last 30 days. So if I Buy to Close at 30-21 days before Expiration I don't lose all the Extrinsic Value, and shouldn't suffer Assignment.
Put Master: Just the opposite. Time decay makes it "less expensive" to close your spread. Cman: You're quite right about Put Credit Spreads if the price of the underlying is going up. I was thinking of the SPY Call Credit Spread I Bought To Close the other day. It went up in price as the underlying went up. [Had 4 teeth pulled yesterday, so I'm not quite with it today.] If the price of the underlying is going down, the price of the Put Spreads does go up, making them more expensive to close. The Rapid Time Decay speeds up either process, up or down, into Expiration Friday. Have a bad headache. Will discuss the other issues later....
I've been in your situation myself. Keep rinsing with salt water, when it's ok to do that, and just take it easy. Sorry to hear about your discomfort.
Are you talking about trading Straddles and Strangles? Have you had success with those? On August 6th, I saw 140-142 as upper resistance, and thought SPY would soon fall back into the 130s. Obviously, I was completely wrong! If I'm very lucky the 150/151 Bear Call Spreads might be above SPY's price in November. We'll see. If SPY is above 150 on October 17th (30 days before Expiration) I'll close the Call Spreads for a loss. I know I started this thread, but I've gone off Iron Condors now. Trying to call tops in uptrends (with the upper leg) is a low probability trade. What happened this month is a perfect example. All my Bull Put Spreads were good, but I had to close all the Bear Call Spreads for losses. Will just stick to directional trades from this point forward. (i.e. Bull Put Spreads and Long Calls during Bull Markets)
its impossible to be directionless.. that was part of the wrongs of the dynamic hedging model... even then your volatility forcasting.. and there is a cost to everything... i think guys who are ICing it are rolling out bigger and bigger as they get more deltas... it takes fucking nuts to get these things going... paper trade rolling out and up see how well that works for ya... i'm curiuos myself.. my impression is most newcomers are so either risk adverse they bleed to death.. or they get so uneducatedly risky they blow up quick.. and if they bleed they get tired and then throw on tons of risk because of frustration... its like bi polar mania of trading.. i can feel it in myself alot... just as relationships are about about boundries.. so is your relationsihip with your trading strategy... if your going to be rolling out and up.. you should have parameters for that.. say i'm only rolling out twice and up 1.5 times every roll.. or something else.. and then stick to it..
Exactly. What's so safe about trading ranges? By the time they become clear on the chart, the Stock/ETF is probably ready to break out to the upside or downside. If the Trend/Bias is up, go with it. That's the high probability trade. Don't try to predict "it won't go any higher than this in the next 4-6 weeks."
The reason I only trade Options now, instead of Stocks and Futures, is because I HATE STOPS! I've just been whipsawed too many times. With an Options trade, I set it up so my Max Possible Loss is -2% of my Equity. Then I let it go where it wants, in this Insane Super Volatile Market. At 30 days before Expiration, I check to see if the trade is losing, and if it is, I close it down. There will still be some extrinsic value in the Options at that point, so I won't have a Max Loss. Thus, all my losses are Less Than -2% of my Equity! This Loss Control System seems to work much better with my "Trading Psychology". I'm a much happier trader now than I used to be!