TID BIT on SHORT STRADDLE CREDIT SPREADS TIMING Picked up a tidbit last midnight browsing SHORT STRADDLES on the internet. It said the ADX is a good slow line for putting on SHORT STRADDLES. When the slower ADX starts to go down after a trend, the price action of the underlying is sideways, probably choppy. You can play SHORT STRADDLES. Just tried it on the 10 day and 5 day hourly chart. Works better on the 5 day, as I'm trading WEEKLIES. I found that interesting as the DMI is probably my most favorite computer indicator. I had not however thought of the ADX having any useful properties before. So this is new to me and looking at it, I can see indeed, you could certainly play SHORT STRADDLES using the descending ADX, or it going sideways. At least this amateur novice thinks so? Will paper trade it on memo paper for a week or so and see how it bears out. Golly gee whiz! In another week I'll be ready to try my hand at a TIME SPREAD! ( grin! )
Open Interest as a target for expiration in the weekly OEX index. Thought I would see where the expiration number will be for today? Somebody once on the internet said that the expiration number gravitates to the most OPEN INTEREST, or largest. I remembered that, despite having fewer brain cells in my old age. So the OPEN INTEREST in CALLS largest is at STRIKE 505 in the OEX and in the PUTS is at 470 OEX in the PUTS. Which would it be? I suspect it is going to be neither and probably more around 495. 88888888888 In the meantime, yesterday's learning SHORT STRADDLE made overnight + $325 gross profit on 2 options, the PUT and a CALL. Thanks to the teaching Guru 'Trade Journal' expertise. *********************** Now we see if the index will continue to behave the rest of today and give me a profit in the BULL PUT CREDIT VERTICAL SPREAD? A very bad bet and a mistake at the time. ************************
What am I missing here (on top of all the other things) with the OEX and NDX. If you look at the percentage change say today for both of them from 10:15 to 11:30. Both down .6% equally. So if the NDX index is approx 4 times that of the OEX, isn't that where my 4 times comes from? Are you saying that there are times when the OEX makes a 10 point move, the NDX could make a 90 point move? Thanks Michael
Yes! You got it! It is all in the scale on the side of your chart. Different scales. Same overall chart pattern, but you have a bigger magnified scale on the NDX. That at least is my impression. I haven't delved into it, as I see no difference in profits whether trading one or the other. **************************** How did you do with your paper trade Vertical BULL PUT CREDIT SPREAD? With half an hour to end of day. I believe I have made mine? My Vertical Bull Put Credit spread returned a NET of +$1590 My Short Straddle credit spread returned a net + $265. For a total for the week of net + $1855. I believe I will trade a SHORT STRADDLE credit spread next week in my TOS web based paper money account. I figure I can do at least one such trade a week and on occasion two. Will if the margin allows move up to 5 contracts. I will also stay right now at 50 contracts on the VERTICAL BEAR CALL credit spreads. Got to make back the money I lost two weeks ago. The commissions on the STRADDLE are $60. On the 50 contract Vertical are $160. The chance of LOSING on the BEAR CALL VERTICAL is 7% possible. The chance of losing on the BULL PUTS Verticals is 40%. So you can guess I will not be doing the latter in the new system. Lucked out this week, and hopefully have learned my lesson? Going to take me about ten weeks to get back even. After that ALL GOING WELL will move into real CASH and start off with $5000 for Vertical credit spread and probably the same amount if the STRADDLES work out, the same. Next week want to study the STRANGLES and how they work?
Falconview: I could see you made multiple posts. I have to focus on few things in markets. Will read and check later today. I would watch the short straddle life (the one currently at the money) until the end. I would also watch the one due to expire next week (same strike). If a last minute rally takes place, you can try to watch what happens. Got to go. The last 20 minutes before the bell are important. Bye now.
Falconview: 1. Let me give an anology. Imagine an car insurance company. The best situation for a car company is that they sell insurances to all cars at a given moment, and one second later all the cars are not driven at all end expiration plus one second. Think about it again. The equivalent of it in the stock market is that the stock market does not move, while time moving. Selling a straddle is insuring against both a rise in price, and a decline in price. Your best scenario is that nothing happens, and you wait until the end. 2. The market timing models are not about the options, they are about timing the stocks. As I wrote before I included them to say that I believe I have an edge in direction, but the other problems may damage an edge, and that those problems are the trader. Review the post in which I discuss this aspect. 3. When I read your posts, I got some statement that you indicate you understand something important. At the same time other statement, written in your wording, put doubts on whether you fully understood. 4. With respect to what I see, it is not something that I can describe it in the sense you seem to think it is. It is an analysis, and not an ABC type of thing. It can be taught, but like other things it needs time, effort, and other things. 5. It seems to me that you are fighting with the BID/ASK spread. One can reduce the cost of the bid/ask spread, but the money comes from time, and correct analysis of underlying and strategy development and implementation. (This post is not edited as I am in a hurry-- again).
That sounds good. In relation to what is next, I would also consider working on strangles first because they are immediate cousins of straddles (a straddle is just a particular case of strangles). Overtime you would also realize that most/all technical indicators say/sing the same story-- what is said in one is also said in an other but it may not be visible to all observers.
Stanford: 1. I think you are right in your comparison of NDX and OEX. I had noticed it in one of Falconview's posts but I forgot to mention it. 2. Is your name Miguel or Michael? I am guessing that when an American ends in a spanish speaking world, he "becomes spanish by name". 3. From your posts, I am sensing that you may be a man of few (but very solid) words. 4. What do you trade or want to trade? Do you have particular objectives you want to meet? I know Falconview was aiming at doubling his account, and I noticed he wrote about it less after I made a post in which I gave numbers based on the straddle to show the maxi returns one can expect without leverage, but I am not sure whether or not that post is related to the less talk about the doubling of of the account. 5. There is one subtle thing they do not tell you about adjustments. For instance, the probability of making an adjustment is far higher than the people may have told you. Do you want to know the number? I do not think that they hide it from people, but rather they do NOT realize it themselves. There is a fundamental contradiction in the talk about adjustment.
Trading journals, My name is Michael, but for falconview living in Belize, I usd the spanish version. You are very insightfull about me being a man of few words, and I am glad you might think the ones I use are solid! I do not trade at all, just looking at the possibility after hearing a friend who traded conservative credit spreads for a very nice return. I am tired of the financial planners and investment people not doing very much for me over the years and want to learn myself. If I was able to get a return of 25% per year, I would be a happy man. To me, the biggest part of doing this conservatively is the admustments when it starts to go the wrong way. I would love to hear your comments on the monthly cash through options site, as they seem to have the closest model (though not as conservative as I would like) to what I would like to accomplish. They do quite a few adjustments, and I am thinking of opening a small auto trading account with them to see what happens. I am not American, but Canadian (your friendly neighbours to the north) Thanks for taking the time here to explain to falconview (and therefore tomyself as well). I am not close to his level of understanding yet, but each time I read something, I am picking up more. Take care, Michael