My historical data shows the following prices for the SPX... On Sept 10th, 2001, the SPX closed @ 1092.54. When the market re-opened on Sept 17th, the SPX Open, High, Low, Close prices were: O = 1092.54 H = 1092.54 L = 1037.46 C = 1038.77 I don't remember the details of the Sept 17th market action from open to close (since I didn't have any significant positions on at the time), but the maximum drop was $55. Does anyone specifically remember the market action on Sept 17th? Was the drop orderly enough for traders to apply their craft, or did the bottom just drop out and stay at the bottom all day long? The answer to this question will come the closest to defining whether (from a trader perspective) this was a BSE event. Of course from a human perspective it was so much more than a simple BSE. Options expiraton in Sept 2001 was on the 24th. More later. Mech
As events show, the upside can be relentless, especially if the IV is low when you placed the position. It makes sense to protect the up side with a credit put spread. I think an IC is safer than a straight credit call spread. Just use some finesse (hedging) to protect the downside. Just my two cents.
look at a tradable entity rather than an index. futures opened limit down, then carved lower after trading resumed.
The point I've been trying to make is that Sept 11th is THE BSE. The market reacted to it. It's the BSE's such as 9/11 that one can never predict or prepare for. The market action on 9/17 was the reaction to the BSE on 9/11. Recent market volatility is not tied to a BSE. It's just the combination of a variety of not very positive economic news. That's why in my trading world of SPX Index's I like to be FOTM so that I have time to unwind. In today's environment a BSE inspired by North Korea, Iran or al Queda would leave us all running for cover. Someone near the money would get wiped out and have little opportunity to protect himself. Unless of course he had a debit spread. In that case he would be a brilliant. But to answer your question I can not recall how orderly the drop was on the 17th. I wasn't doing SPX spreads at that time.
OK. 9/11 may or may not have been a BSE regarding an SPX Bull Put spread. If there was any wiggle room on 10/17 to trade by exiting the short put while letting the long puts recover the short position losses, then it was (IMO) not a BSE. Here is my point: The antagonists against vertical credit spreading (particularly on the Put side) are constantly belittling the poor RRR's and vulnerabilities to BSE's. And yet while the risks are rare, they are obvious to everyone! There is another group who apparently enter into these vertical positions without a trade management plan, and when they experience account damage on sharp mkt moves, they want to cry out "Black Swan", "Black Swan" when the problem was that they failed to take control of their trade situation in reaction to real-time market moving circumstances. To my mind, there is a significant amount of 'Chicken Little' syndrome here regarding BSE's and verticals. The rare true BSE's hurt the majority of traders, not just vertical credit spreaders. I'd like to encourage the credit VS antagonists to post their alternative trade suggestions every time they want to rant and rave about BSE vulnerablilities and poor RRR's (It is OK to post the vague greek speak... but also post the trade alternatives associated with the greek speak... ie. where's the beef!). The credit VS's are high probability, poor RRR trades. And when you improve the RRR's by switching to different spreading techniques, you also reduce the probability associated with the trade. Trade sizing is a key aspect of credit spreading. Do it on too large a scale related to your account size and you're liable to be 'chicken littleing' more often than you might like. And like Forrest Gump... that is all I have to say about that! Mech
Deed is done now Time for a run? http://www.imdb.com/gallery/ss/0109830/1-1.jpg.html?path=gallery&path_key=0109830&seq=9
I have a friend who is considering opening an account with TOS. He understands the benefits of their analytics software- but this is his question: Is their platform 'easy to use'? Thanks Mark
Mark, It is very easy to use for option trading. It is the best service i ever got. The margin is very friendly too. They have their own proprietry margin software that will give you the best buying power under reg-T. If you use ACH fund transfer, they can make the fund available immediately without having waited for 2 days. I highly recommend it.
It does not look easy at first glance but IB is also overwhelming at first. However, a few times clicking around or at worst watching their live video walkthrough, you pick it up fast. They have great tools to place complex trades as one (FLYs, Combos, Diagonals, etc....). The real ease comes in, at least compared to OX, is that you can do everything on one screen without refreshing or changing screens. IB has that but I think TOS is better cause you can browse through the chains much easier and see different pieces of info at once.