Michael I´m out of them. But it´s Sunday and just satisfying some curiousity. Was looking at 6% otm options in the weekly and 12% otm options in the monthly. Looking to see if there were any premiums. This is a safe distance if you can find an index. Can't find any such premiums though. I was running your adjustments, but by the time you calculate the market makers spread it becomes something very close. For example, about a 60 cents is all you would need to move the wrong way, after calculating in the market makers spread, in the difference between the selling price and the buying price, plus your 150% premium change adjustment for the OEX. Having got WIPED OUT twice this year totally in credit spreads, all the earnings gone, I was trying to just see if there was anyway to protect yourself. Can´t see it though.
Education is an admirable thing but it is well to remember, from time to time, that nothing that is worth knowing can be taught. (Oscar Wilde) I thought this was cute.
There has been a customer who has been selling the oex weekly out of the money call spreads each week. Last week they sold over 10,000. Could be a collection of different customers as the size continues to increase every minute. Currently they are offering the Nov 12 570/575 call spread about 5000 @ .10 No takers yet.
Just caught your message. I´d already closed out of THINKOR SWIM Went back in, but I didn´t find any premiums at 575, or even 570. The closest premium was at 560 strike in the OEX. I remember looking this morning and didn´t see any premiums either. I would enter if it was 6% deviation out. I believe the 570 near closing here, is 4% out. Which is a pretty fair chance of winning. More than 80% anyway. So I would enter at 580 but not closer. In the last 8 months, I´ve got wiped out twice with credit spreads and lost my whole wad each time. The last time about $13,000 that I had made. The first time was a learning experience. The second time too I guess? I had entered the trade in the monthly instead of the weekly by mistake and because it was so far out the money, let it ride and eventually had to cover it. ( a clerical error ) Nevertheless a miss is still a miss, no matter the excuses. I´m laying off the credit spreads right now, unless I can find one, or work into one, in the weekly that is 6% out from the Monday OPEN. Or in the monthly 11% OTM from the monthly OPEN. Not so likely to happen, though I expect once in a while it would. Trying my hand at getting back into buying options again. Just lost again today, $266 in a $5000 account. So this loss I chalk up to re-learning how to pick an entry and to take a quick loss if it doesn´t work out. See if I run through $5000 in TOS, or if I can make it?
CREDIT SPREADS CREDIT SPREAD TRADING I HAVE LEARNED IS A 100% WIN TYPE OF TRADING, OR DO NOT DO THEM AT ALL. NO MATTER THE MISTAKE, BEING GREEDY AND SELLING TOO CLOSE, OR ADJUSTING AND CLOSING WHEN THREATENED, OR ANYTHING ELSE. MY EIGHT MONTHS OF EXPERIENCE SHOWS ME AT LEAST THAT TO WIN IN CREDIT SPREADS YOU MUST BE RIGHT EVERY TIME, TRADE AFTER TRADE, YEAR AFTER YEAR. IF YOU FIGURE IN THE NATURAL TENDENCY TO INCREASE BET SIZE BY COMPOUNDING AS YOU PROFIT, OR ACCIDENTS BY ENTERING THE WRONG NUMBER OR SOMETHING. JUST ONE MISTAKE AND YOU LOSE EVERY DARNED THING. THE RISK TO REWARD RATIO IS TOO FAR OUT OF WACK. I´m interested to see if Michael can make them work with his adjustment philosphy system, or whatever he is doing. But have serious doubts.
Absolutely true. I have seen this many times. A customer starts selling out of the money spreads. They make money over and over again. They keep increasing their size and boom, the big move takes place and they are wiped out. Sooner or later it will happen
we cs all the time, and don't win all the time. it is a matter of honoring exits, not sitting until max pain, for us at least.
Elite Traderf Okay I'll bite? The mystery about honoring your exits. I presume then you trade the credit spreads in a directional play? Would that be right? Not in a TIME DECAY mode. Or maybe both?
What's mysterious about honoring exits? Every trader does that. If I sell a credit spread for $500 and it has a worst case loss of $6000 do you think I'm going to sit around and wait until that worst case loss has been realized?