You are correct that the markets need to be probed, b/c the mid-point of the displayed market is not always the true fair value. The best way to do that is to get a firm quote from the pit so you have information prior to exposing an order, rather than giving this info to the market makers. For IB clients trading SPX in size of at least 100 contracts per leg, we can typically get .30-.50 wide markets for significant size, compared to the ~$2 wide displayed market. Please contact me via private message w/ any questions. Thanks.
Kevin is correct.... the spread is usually .20 -.30 wide at best. If you guys are trading the SPX....... you really should consider a floor broker to work your orders. We currently use Lake Shore.... through VtraderPro. The commissions are higher, $1.20, but the fills are fantastic... which more than compensates for the costs. Let me say this again.... if you're trading the SPX or other PIT traded indicies, for your sake, use a floor broker..... save money... get better fills. Murray
Hi Coach and other regulars of this forum, I'm slowly reading through all the posts and am up to Nov 2005. I find it very beneficial and particularly like when the well informed, experienced traders challenge ideas that the less experienced of us take for granted. In this respect I find the insights into -ve gamma/+ve theta aspect of credit spreads interesting. I have come to the conclusion that credit spreads are simply a gamble (mitigated by sound adjustment decisions and some understanding of tech analysis), with the ability to select the payoff ratio. I think once one accepts this fact there is nothing wrong with using them. Initially there is a -ve profit expectancy, but (correct if wrong) with one correct decision to adjust/close a trade early, you theoretically now have an advantage. Mathematically, over the year, you should now come closer to +ve expectancy. By jumping to the last pages of the forum it seems that there is less focus on credit spreads than in 2005. Have any significant new strategies been discussed between then and now? Do folks think that the current market is not suitable for these trades? Personally I think that when vols increase, it lets you go further OTM to receive the same credit, somewhat negating the wild swings. Anyway, just wanted to say thanks to all for a good forum. From browsing the yahoo group topics it seems this one is head and shoulders above the rest. Let's keep the trade ideas and therefore constructive criticism going. It's surely the best way for us to learn. Here's to retiring early!! Aaron
Aaron. Welcome. Credit spreads are still king and iron condors allow you to play both sides of the market. As for the sale of credit spreads being a 'gamble,' owning stocks is a gamble also. When well managed, these spreads provide a far greater return. Keep reading. Mark
1° First of all, choice a stock with sideline range, if not see the next: 2° Write In The Money Calls (this protect You more deeper)[one or two strike deeper, depends increment] 3° If exercised sell NAKED PUTS to re-enter in position at lower price (if exercised) ONE STRIKE lower than the spot price. If not exercised and every time Buy-Back at lower price the SHORT PUT, when The STOCK move higher in price, sell again when stock price decrease a little (f.ex: sell the PUTS at 1.50, buy back at 0.90 f.ex, DO this every time much more as you can) 4° If exercised When in STOCK position again, Sell the calls If the stock decline buy-back the calls, stop the position OR when STOCK go higher sell the calls again. Do this much more as You can, f.ex into QQQQ shares, try to Buy Back 60ç lower in a side range. 5° Manage STOCK enter in low swings selling calls in high swings 6° Sell covered calls when the stock move a little higher 7* Buy-Back the calls at lower price, then to sell again when STOCK raise on prise. When exercised, Again sell the NAKED PUTS 8° Be aware about Day Trading Pattern (for accnt less than 26k) [9° excuse my rough english] I hope this Will Help If not try again or Skype me , contact http://dot-circle.net/contact.html
Don't know that I'd call em the 'king'. Calendars have less risk, and butterflys have worked well for me lately. But back to the vertical spreads... The last few months, I've experienced some unusual timing problems with verticals. On three consecutive monthly trades, I've had stops in place that happened to be triggered while I was away from my trading platform for a few hours until past mkt close (which is rare). These positions were small NDX positions that resulted in losses in the $3.5K - $6.5K range. The stop loss orders triggered based upon a Delta level of the Short position and took me out of both sides of the trade. If instead, I had limited the stop loss to the short side (rather the both sides), the results would have been one (1) breakeven and two (2) big profits the following day by waiting to close out the long side. One of the trades that lost $3.5K would have yielded a profit of $21.5K had I only had the stop in place on the short side, and then exited the long side the next day. Anyone care to comment on favored trade management techniques for those occasions when you might not be at your trading platform during volatile market conditions? Mech
Hi Mech! First of all, initiate the two legs separately. The long ATM, sell the short ITM (when price move higher for calls) Keep 3/10 of the longs free for covering /may be/ big market move [delta neutral] Take a diagonal spread f.ex Do not place any stops Think to keep the "long" position, the long leg, as much time is possible. Trade actively the short leg. As much is possible. When money come into the account Take a new long leg, for the next expiration date. Sold the previous leg at the best price possible ITM Continue to trade actively the short position, by multi buy-back and selling again and again... Note: The MM see Your stops! They play with this! Don't give them the 10 or 20 cents every time, this is too much costly. Signé Artes - http://www.dot-circle.net/coveredcall.html (french)