Another tastytrade troll. There is no "trading them properly" when you sell a 5/1 risk and it gaps through your strikes. Tell them to "take it back; I traded that properly!" They taste like shit. "Using them properly" is fucking moronic. You should slap yourself. Delta1 (futures) are not applicable. Tell that sosnoff clown to get a haircut.
Does drownpruf seem to believe that he/she can do riskless trades? Every trade has risk, and almost every risk can be managed or hedged. Proper underlying selection, position sizing, and active trade management will reduce risk.
I stated that? My PF is better than 3 on a sample exceeding 5Y. I don't sell these moronic credit spreads because they cannot be hedged. Any hedge risk (pick a moment) will exceed the risk of the spread you're hedging. But since you ask; yeah, I've bought many verticals at small debits and even credits. There are guys here who have actually witnessed some of those trades in R/T. Admittedly, your only exposure to options is a book you've read. wtf is "active trade management"? Is that like "trading them properly"? I am not the he/she here.
I personally just think we are working off two different schools of thought. There is a proper (read more optimal) way to trade credit spreads. I optimized prior to any trade when dealing with a credit spread making sure the underlying is liquid and the options are liquid. Then I look for Implied Vol Percentile (IVP -Underlying IV relative to itself) greater than 50% and finally how much an underlying has moved (price) in a 10 day period (+/- 5% or greater). I don't personally put a credit spread on until these events occur. These entry parameters may also contain the gap/large moves you speak off. This DOES NOT mean I'm right, but with time in the spread (20 - 60 days) and the other factors I mention above increase the probability of being right....and some underlyingâs just get away... I agree with you in that just willy-nilly throwing credit spreads on in trades will more than likely end in failure, but I don't do that. I'm sure you have methods of entry before you perform your own trades too. Finally, I am a trastytrader and because of that service, I've become successful in trading options.
Agreed. My edge is quantifiable and yours is not. Yeah, I am an ass, but my intolerable personality is borne out of listening to guys like you who think they've found the theta grail. Like the entire street hasn't figured out the lack of utility in this shit you call a strategy. Don't take R/R > 1. Don't sell flood insurance in NOLA.
Quoting TSLEXI: The October 13 CVX 110 put is trading at $0.28, and the 115 put is trading at $0.57. My max profit is $29/contract, and my max loss is $500/contract, for a ROI of 5.8%. As long as CVX doesn't drop below $114.71 (currently it's trading at $118.13) by expiration Friday, I stand to make a profit. CVX: http://finance.yahoo.com/q/bc?s=CVX&t=1y&l=off&z=l&q=l&c= Oct 115/110 bull put spread for a net credit of $29. Yield = 29/471 = 6.16% Prob = 79% Expectation = .79(29) - .02(471) - .19(236) = 22.91 - 9.42 - 44.84 = -31.35 This is a bad trade. The downside probability times the downside loss is much greater than the win amount times its probability. (the extra term is to account for the possibility of CVX ending the trade between the strikes) i.e. the trade has a negative expectation. You would need twice the yield to get a positive expectation. All the rest is just hot air.
I would do so if this particular strategy never worked, so thereâs no need to. I instead pat myself on the back for a job well done in learning how to option trade. It isnât the only way to trade options, but Iâve found it works for me. Man, such dislike for the guy huh? Why donât you tell him? I donât have a problem with it.
I don't get this messianic stuff. Any intro book to vol would talk about position 101. A good book on trading would tell you to avoid positions that cannot be hedged. Dislike? I think he needs a haircut and miss a meal here and there. I think the guy is dishonest and doing a disservice by glorifying this credit spread nonsense.
R/R > 1. It is impossible for credit spreads to have a R/R > 1. But I do like the statistical edge they provide on top of event driven entry points I trade off of. Yet again, I just think we are similar just on two different sides of the isle. If youâre winning trades and money, everything should be fine!