This month I'm a IC front month BUYER for the first time (RUT & NDX), after 4 months as a seller. I switched b/c that's what my Expected Outcome Spreadsheet said to do; however, I'm finding it really difficult to be a buyer - something I didn't anticipate. I don't think I have the proper mindset to take advantage of a "homerun" - I know I'll always close out too soon for fear of reversals and getting stuck in the middle. Conclusion - I may go back to selling exclusively, with less on the table when I think the odds aren't as good. Anyone else find that they're only comfortable with buy or sell? Hopefully I'm not significantly reducing my long-term odds by batting from one side of the plate (no sexual reference intended )
I tend to be an optimist so my trades are generally on the bull side. I have a hard time determining when to be bearish. Not quite the same as what you're saying but the same sort of mental block.
I am more comfortable with credit spreads, but I use long straddles when volatility is low and I am not sure of direction. Once the volatility peaks, those gut wrenching days, that is when I exit the spread. If I am trading more than one straddle, I can stagger my exits. Spikes these days don't seem to last very long, so I try to be nimble. It is the declines that seem to last longer. I think with debit spread IC's you gotta be patient and nimble. As the volatility increases, these OTM calls do well, but the short call cancels some of the positives. What if you did a long strangle? As a direction is established, you can exit the losing option and "ride" the winner. Or you can exit the winner at some point, and expect the underlying to revert and give you a chance to make the other option a winner or at least break even.
So far, I prefer to be short theta through either the fly's or verticals. I don't like short verticals by themselves though... I like to setup long ATM verticals or slightly ITM. I tend to have an uncanny ability to pick stocks that go nowhere
I have only been trading options for about 3 years, and during most of that time, volatility has either been too crazy to trade anything, or has been falling consistently. So I have not had an opportunity to develop the skills for long vega positions as much as for short vega. Lately I have been experimenting with dialing vega up or down by changing the width of double diagonals. Will remain small till I have my feet under me.
AFAIK, the past 3 years was a once in a lifetime opportunity... at least until it occurs again. The current going nowhere doldrums is the most boring market of all. In addition to changing the width of your double diagonals, you might consider experimenting with ratioing them (unbalanced).
-------------------------------------------------------------------------------- Quote from erol: I tend to have an uncanny ability to pick stocks that go nowhere [/B] -------------------------------------------------------------------------------- I have one I'm watching for about 6 weeks doing the same thing, going nowhere. I have given this a lot of thought and checked my notes and about 4 years ago remember watching the same stock for several months doing the same thing, going nowhere. Funny how we go can nowhere more than once.
The market has an upward bias. Wall Street devotes effort 24/7 to sell paper. Buying is external. Selling, with the exception of shorting, is internal. Once you fill long, your bias changes.