High Probability - Low Risk Spreads

Discussion in 'Options' started by jones247, Sep 17, 2008.

Which spread do you like best for High Probabily, Low Risk

  1. Reverse Calendar Spread

    10 vote(s)
    27.8%
  2. Short Condor

    8 vote(s)
    22.2%
  3. Reverse Iron Condor

    7 vote(s)
    19.4%
  4. Short Butterfly

    8 vote(s)
    22.2%
  5. Reverse Iron Butterfly

    3 vote(s)
    8.3%
  1. I am completely convinced that the best way to minimize "gambling" in the market is with the use of spreads. I've narrowed down my list of high probability, low risk spreads to the following 5 spreads:
    (1) Reverse calendar spreads
    (2) Short condor
    (3) Reverse Iron Condor
    (4) Short Butterfly
    (5) Reverse Iron Butterfly

    Which ones do you propose have the best risk:reward & success probability profile? Of course, they are all IV plays.

    thanks,

    Walt
     
  2. you got first vote
     
  3. dmo

    dmo

    It's not a matter of which spread you do. It's the price at which you do it.

    It's like asking "which is better, to bet on a coin flip, or on the roll of a die?" Well, if I can risk less than a dollar to make a dollar on the flip of the coin, the odds are on my side. If I risk more than 20 cents to make a dollar on the roll of a die, the odds are against me. So given that scenario, the coin flip is the better bet.

    But if I have to risk more than a dollar to make a dollar on the coin flip, and I can risk less than 20 cents to make a dollar on the roll of a die, then rolling the die is a better bet.
     
  4. There are really only three options here.
     
  5. Although I voted for the Reverse Calendar Spread, I REALLY like the risk:reward of a Reverse Iron Condor (especially in a volatile market)...
     
  6. The risk: reward ratio is pretty sound for all of them (with the exception of the reverse calendar spread if held for too many days). I guess that's probably why I've narrowed by choices down to these. Also, probability is a key factor... as trading comes down to probabilities and risk management...
     
  7. Are you merging the reverse iron flys/condors and the short flys/condors?
     
  8. Well you do need some serious vol modeling before those short calendars become high prob plays. Without that it's nothing better than the average coin flip trade on ET. LOL
     
  9. IMO, unless you are an options market maker, the slippage will eat up your profits.
     
  10. Perhaps my perspective is too simplistic; however, I rely on the volatility crush after earnings and/or after capitulation.
     
    #10     Sep 17, 2008