Yes the trends, both bull and bear are more obvious on a 2 year chart using weekly bars. The indicators are straight forward. Once you have started the trend, you can set a credit spread, above or below the start and comfortably sit on it, until the trend quits, I would think. Then take your winnings in increase by a directional. That hit me the other day, when the mistaken monthly credit spread I placed almost gave me a profit in a gyration away from it. It would have paid to close the spread, even at the extra commissions. I will hold it for either a gain by daily trend, or time decay. I´m doubtful it would get hit otherwise. Tell me what you learn? You can PM if you want. I´m looking for a sideways weekly bar this week, or slightly down lower than last week.
Michael Lets suppose you are trading 3 month out options and spreading a trend. What would be the result of the trade after closing it out I wonder in percentage gains. If your friends, friend has those numbers I would like to hear them. Save many months of trial and error to do the same thing experimentation. If 3% is the average return on a credit spread investment say of $25,000 margin, but a longer term credit spread trend trading on direction has much higher premiums, I believe from your experimental trials that the return on capital remains the same about 3 %. Since the premium credit in far out options is larger, if I remember your report correctly though, it still was like 3%. Not sure how that would equate, as to the comparisons of margin necessary as in number of contracts, versus premiums collected and TIME spent waiting for that 3%.
falconview, I dont recall ever looking at further out numbers. If the return is higher, and you start one every month, the length of time really doesn't matter, does it? Michael
Micheal I don´t really know. I´ve been looking around here for somebody on the internet. I suppose in a directional trade using a credit PUT spread you would be trying to gain intrinsic value in a trend. I´m not at all sure how it would work in reality. It´s 3 a.m. on Monday here.
price it out, but theta >60 days out is pretty small, especially with tight spreads, almost non existent.
Elite Trader I was not thinking of a two or three month credit spread for theta. More of a positional move in direction and buying it back at a cheaper price. Still not sure how that works. Found a credit spread calculator online, but it wouldn´t let me change the index to see what would happen. Only gave a simple breakeven number. Looking for a credit spread calculator to run the numbers. Know of any? +++++++++++++++++++ Michael Trade for Monday Long Options buy 5 OEX 540 PUTS at $11.20, sold at $12.35 $575 - $36 commission for a net of $539 Cost of trade $5265. Return on capital 10% Time in trade, most of the day. Kept cancelling my sell orders and setting them lower and lower as time passed. Finally got hit an 1 1/2 before close.
Can somebody tell me what happened here, profit or loss wise? Index was at 537.78 Put on a DEBIT SPREAD in CALLS buy 5 contracts 540 @ - 7.50 sold 5 contracts 550 @ $3.10 For a net debit of - $4.40 The index went to 540.21 I closed the DEBIT SPREAD in CALLS sell 5 contracts 540 @ $7.50 buy 5 contracts 550 @- $3.40 For a net credit of + $4.10 ____________________________________ Did I make any money? What happened? Explain it to me, please.
I guess you would say I was doing a diagonal straddle in debit spreads both in calls and puts. Index was at 537.78 PUTS DEBIT SPREAD 5 contracts buy 5 - 535 @ - $8.40 5 contracts sell 5 - 525 @ + $4.70 Net debit of - $3.70 Close the spread. Index now at 540.21 PUTS 5 contracts to close, sell 5 - 535 @+ $5.20 5 contracts buy 5 - 525 @ - $2.80 Net Debit of + $2.40 _______________________________ DID I REALLY MAKE MONEY BOTH IN THE PUTS AND THE CALLS? WHAT DID i MAKE?
Falconview, what happened, did the heat get to you First example bought for 4.40, sold for 4.10 you tell me if you made money or not Second example, bought for 3.70 sold for 2.40, what about now? Had the interesting dinner with the fellow who was doing a lot of credit spreads (like Phil from the other thread). He said his account just about went to zero in 2008, and he trades less of the spreads now. He said his problem was his trading nature, too agressive, looking for more returns, closer to the money and he got stung badly in 2008. I asked him if he had been trading call spreads only, looking for only 3% per month, how would his account be now. He said it would be almost double, rather than almost zero, but he said it did not have the discipline to trade that way. Money is not really an issue for him, more for the game of it. So I think I will alter the long term strategy to only trade the call spreads and see what happens. Michael