Discuss: I've seen backspreaders go broke as often as naked option sellers.

Discussion in 'Options' started by OddTrader, Aug 21, 2010.

  1. That's an old thread. I thought IluvVol's posts were very good.



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  2. What's so hard to comprehend? If one does most any strategy position in real size and the worst possible scenario for the position occurs, would you expect a good result ?? Add in a dose of money mismanagement and you're really cookin your goose.
     
  3. 1) Premium sellers can go broke from a single, gigantic loss. It's death by the guillotine. :eek:
    2) Backspreaders can go broke from taking lots of losses before a gigantic profit occurs. It's death by one thousand cuts. :(
     
  4. According to McMillan, "The strategist must be alert to the possibility of early exercise in this type of spread, since he has sold a call that is in the money."

    My guess: Probably any uncommon combination of uncommon volatility and uncommon leverage would kill while trading with common knowledge!