Thanks for the encouragement. Actually, I use simple TA such as moving average. I try not to sell spread against the trend. Also, I don't sell put spread on the day when a stock price is up. I sell only on the day when a stock is down. I really have to restrain myself when I see the stock I'm watching run up and can't do anything. I hope my method increase expectancy somewhat. I am interested in energy and tech stocks. There are about 25 of them I follow and when it drops, I really want to take advantage of it. So, I guess I will take a shot anyway if they were the stocks I know well.
I try to increase expectancy by trying to forecast underlying price. I use vertical spread mostly because I don't know how to predict volatility. Thanks for the reminding on the market conditions. I'll switch it as soon as it stops working and I won't just trade the spread only. I prefer condor or files but I don't see a good trade for now.
I decide to take profit on aapl. My reason is that it ran up quite fast and may come back down a bit along with the markets. Then, I can put on 60/65 credit spread later. Close AAPL 50/55 DEC credit put spread for $0.15. Profit $1.35. Now I reduce my lost on previous XEO to about $165. Open 1 VLO 85/90 JAN credit put spread for $1.40. I got it around the middle from b/a spread. Reason: VLO took a sharp drop today. Looking to sell credit spread on SUN if it drops more.
There are different opinions about options strategies' expectancy. I agree with those that think that options are fairly priced and that all options strategies have zero expectancy when you don't consider costs (slippage and commissions). The only way to increase expectancy is to leg in at different underlying prices or implied volatilities, so that the final position's cost is less than its cost to open now. I.e. you want to open a vertical spread on an underlying that you think is breaking up. Spread's bid / ask is .9 / 1. Instead of buying it for $1, you bto the long leg, then place a limit order to sto the short leg, so that the total cost will be .9 or less (long's debit less short's credit less commissions). This means that the spread appreciated in value, let's say to 1 / 1.1, while your cost is .9. You have positive expectancy at this moment. In my opinion your method doesn't increase your expectancy, if you define expectancy as I assume: expectancy = (profit_amount * probability_of_profit) - (loss_amount * probability_of_loss)
Thanks for the explanation! I agree with you. I have different question. Suppose this is the situation: 1. Sell 1 contract xyz 50/55 credit spread $1 After 5 days, xyz does not change 2. Now Sell 1 more contract xyz 50/55 $0.90 Since now the fair market value of xyz is $0.90 but we sold 2 contracts average price (1+0.9)/2 = $0.95. Would you say our expectancy is positive ?
I had a calendar diag here: 1x SPY -123 DEC + 121 JAN diag put spread for 0.10 debit. Bought back DEC 123 for 0.15 : reason: DEC 123 does not have much time value left. Also, the market went up to almost 1270. Real Profit on DEC 123 $1. paper lost on JAN 121 (now trade for $0.45) $0.85 So, I captured the time difference for $0.15. Looking to sell 123,124, or 125 JAN put tomorrow.
The spy dropped a bit so I sold 124 put for $1.05. Now I rolled the 123/121 calendar diag to 124/121 vertical put spread. The fair price of this one is 50 cents. Since I made 15 cents from the roll, my expectancy is 15 cents better than fair value.