SPX Credit Spread Trader

Hi YIP,

That's extremely shortsighted. Anyone who buys debit spreads came out a winner. Also backspreaders and their cousins, the straddle/strangle buyers. And that includes premium sellers who own positive curvature.

Perhaps the only strategies you consider worthwhile are money losers in this environment, but that does not mean 'most' lose.

Mark

 

Rally, be careful, you are starting to sound like me.

 

I disagree as well. There are many of us that are doing well in this market environment. In fact, for the newbies on this board, this is how the market actually behaved for about 10 years. These kind of markets build great traders and eliminate the bad ones.

 

Seems like a training opportunity for the benefit of us newbies. This market certainly has our attention and many would give a left gonad (or other part of the anatomy if not gender appropriate) for learning how to survive this kind of market drop. Would you care to summarize the differences between the “great traders” and those being eliminated i.e. “bad ones”?

My personal experience was that I survived the June/July 2006 drop with limited loses because I limited my commitment to about 20% of funds. The situation was made even more frustrating because I dumped right at the bottom (SPX at 1226) when I would have been positive if had not panicked. I stayed on sideline until Feb 2007 (out of frustration plus was otherwise busy). In February I was looking good with FOM condors and some March ITM Calls until last Thursday. I realize that I could be the “poster boy” for the “bad ones” but hope you won’t rub it in.

 

Drof:

Read, read, read. Start with this thread and save pages to a file or make hard copies or reference the pages in a notebook so you can recall them later.

Go to The OptionClub or OptionCoach on Yahoo Groups. One or the other, or both, offer a suggested reading list. Buy the books and dig in.

Ask lots of questions here and elsewhere. There are plenty of people who will answer your questions.

If you haven't already, open an account with Thinkorswim. Use the Analyze page and model strategies. Adjust the variables such as vol. and time to gain an understanding of how they will effect your trade. Plus work through adjustments and bailouts.

Take your time and invest lots and lots of your time into this endeavor. You will quite possibly be glad you did.

Good luck!

Bob

 

Let me put the argument you made in simple terms:

Me: A lot of apples are red.

You: NOT TRUE! I know of a yellow apple.

Whether Argus makes or lose money is not relevant to whether FOTM spreads are a good strategy or not. If Argus is selling 1400/1390 put spreads with the SPX at 1450, then they are playing with fire in my opinion. The person I know who is doing this on a much bigger level than me has not lost money during this drop because they are still out near 1300 on the short side with 2 weeks to go to expiration. Still does not make the strategy great or poor.

An old saying: An example is not a proof.

If Argus got wiped out, then their risk management sucked. After Tuesday's drop, there were 2 separate opportunities to hedge or get out of any put spreads FOTM with a small loss. But again, that is not really relevant to the opinion expressed. Someone trading naked straddles with 20% of their portfolio is exercising bad risk management over 20% of their portfolio. But I am sure some people can do naked straddles under the right conditions and make good money.

But I would never make blanket statements that any strategy is the best or the worst. Credit spreads are not the best strategy, by a long shot for most but they simply have worked for me over the past few years. This journal shares those trades but makes no blanket generalizations.

Let's leave the oft-repeated discussion out because if people here are not smart enough to heed the warnings that have been made countless times in this journal then they have no one else to blame if they took massive hits since what happend this week is not even outside the realm of possibility.

This is a dead horse so no need to revisit it over and over again.

 

It will be a month or so before he posts his results but I am quite curious to see how he fares through this one. He is certainly the old hand at this game.

 

I see nothing wrong in reminding people that the old risk management cliche doesnt always work especially in light of the price action last week.

BTW, you save the apple analogy for your students, i am certainly aware of what data mining is.

 

yes you did a perfect example of random sampling

 

Let's move forward and leave the journal to those who want to discuss SPX credit spreads. All other talk is off-topic.