Personally I'm only expecting one more good push higher during a rather choppy JAN. Then a relatively uneventful FEB MAR and early APR.
>I have been reading on these diagonals. It would benefit all the newbies like me(and a refresher to experts) if the experts can summarize this strategy. Check out Dan Sheridan's webinars http://www.cboe.com/LearnCenter/webcast/archive.aspx
Today, I would be opening only Mar/Feb spreads, unless there was a specific Feb/Jan that looked just too good to pass. And if I were able to do so, I would consider Apr/Mar. It used to be possible for me to get the mid-point, or a nickel worse. Then the MMs would give about a dime on each side, so 20 cents better than the natural bid/ask was the best I could do. Now, it's hit and miss. Sometimes they fill me as much as 25 cents better than the natural b/a and at other times they won't budge. I then must wait until the market moves, or I get no fill. Yes, 'slippage' makes things difficult. 1) I know I am not able to predict market direction. thus, I do not time my entries 2) I try to keep an equal number of put spreads and call spreads, but often get out of whack - due to market movement 3) I sell call spreads on rallies and put spreads on declines 4) I am more afraid of a decline here, so will carry more call spreads (with extra longs as some protection) To answer your question, I do not go one sigma out. I go as far out as possible, as long as it gives me my minimum premium for a 30-point spread (RUT, MID, RUI). What's my minimum? It varies. I'd like to say 60 cents, or 2% of margin, but I sometimes take less. Sometimes I go one strike closer to the money, if the premium is attractive or if I 'feel' that the index will not get that high. Example: on the recent highs, when I was selling calls, I chose to sell RUT 820s. On the previous rally, I sold the 880s. It just depends on what looks attractive to me. For me, it's an art, not a science. Thus, is difficult to describe in detail. Mark
OK... I am quoting a portion of a very old post from Mav (#551). And here is my point: Last weekend I ragged on Mav about being a 'riddler', and I was off-base in my criticism, and I apologize. Since last weekend, I have read every post that Mav has made on this forum (about 120), and I must admit that Mav has been generous in sharing his perspective on the risk aspects of vertical credit spreading thru his posts. I don't think Mav ever intended to engage in sharing specific trade preferences, but rather wanted to share his 'view' as a prop firm manager along with what he looks for in terms of necessary risk control among the traders associated with his firm. (If I'm wrong... sue me). While I've made a little money doing verticals, I am drawn to Mav's idea of "making 1% to 2% a month and still make a living with very tight risk controls". Unfortunately, I've not seen any options trading styles revealed here that match this concept (of course I am still weeding my way thru the rest of the posts). I am currently making 6% to 7% per year with very little risk (not w options), but would appreciate more insight into tighter risk control w options that yields 1 - 2% per month. Can anyone suggest an options strategy worthy of further research that would have the attributes mentioned by Mav? It would be neat to be near a resource like Murray's Grand Rapids Investment Club, but its' hard to find that in the rural environment that I've chosen to live in. D
Mark, or any other IB customer, can do the same thing right now by trading the diagonals with emini futures options and SPAN margin. Any good futures broker gives you the same capability. For the regular trader, much easier than going with a haircut account. Which is not to suggest you take the extra leverage and max it out. But it does give you the flexibility to adjust and react, if warranted. Caveat venditor Let the seller beware
Since someone brought up an old quote by Maverick, here is my favorite quote from 10-17-05 10:26 PM: LOL...
The RUT market makers are getting more and more difficult. Today, a spread market was 0.50 to 1.10; I offered to sell at 0.70 and there wasn't even a nibble. Not even a $0.55 bid. Pretty sad. Mark