I was hoping no one would read my comments but felt obligated to put in the good, the bad and the ugly. I stared at the computer a lot today and watched the weekly..at one time tried to buy it back for .90 but didn't get filled... since I wasn't losing money ended up doing nothing will wait until tomorrow. I did have a thought that I'm working on..I could actually buy a 1235/1240 long vertical..roll 10 of the 1250s to 1245 and end up with a 1235/1240/1245 B-fly for a credit of about .45 taking away the risk in the Nov (still have risk in the weekly) and if spx does get to 1240.... make mo money and I think the weekly is being treated as a diagonal
REMINDER OF CURRENT POSITIONS: - 90 SPX NOV 1150/1160 Put Spreads @ $0.65 -300 SPX DEC 1135/1140 Put Spreads @ $0.30 So you do not have to go digging for it. If market has nice dip I will add more DEC puts. Not looking to add any call spreads at the moment but that could change if instead we still keep moving higher and upper strikes have decent premiums. Phil
coach (or anyone), what do you see as resistance on XEO? 565 - ?????? would a 570/575 spread be too close for Nov.? Thanks,
Hello coach, reading here with great interest, thanks a lot for sharing! You seem very successful with your spread strategy and I suspect it to some extent (apart from conservative risk management and experience in gettin the direction right) helps with your solid all-round financial situation. Steady incomes (yields, booksales, radio etc) mitigate the great fear of standing naked in front of an unbearable loss that many traders have. Pockets as deep as required bring stamina to trading decisions. Just my guess. Since your strategy implicates the occasional (unprobable but possible) large drawdown, would you care to share your worst drawdown ever? Whats the darkest swan you ever met so to speak? Emotionally (related to trading) or financially? Cheers Joe
Hi and welcome to the thread. First let me say that I do not get paid for the radio show, in fact I lease the time myself and pay for it. So it becomes my show and I have the freedom to do whatever I want in my time slot. I do it because it is fun. The book was a great experience but the money I make from the book is a pittance and whatever I get I have to split with my co-author anyway. In fact, with all my royalties to date I bought a laptop- so no income reliance from the book (I laugh everytime someone claims I wrote the book to make money lol, anyone who says so I am more than happy to show them the Wiley statements lol). The book was 6 - 7 months of effort and the reward was having it done, not the small % I make off the wholesale price divided by 2. As for the unbearable loss, I do not have 100% of my capital in any one strategy or any one position so no black swan event will ever wipe me out- not even close. The reason is risk management. I know the the old "eggs in one basket" cliche is silly but it is true. that fact alone gives me a lot of confidence to trade because I know my life savings or capital is not all at risk so I am not so emotional and scared when trading. If I take a loss, I simply look at the long-term goals and work at getting it back one month at a time. As the journal describes, I have not had a losing month or drawdown this year. Of course I cannot expect that to always be true and my focus is just to make sure any loss is limited as best as I can. So I remind myself to be realistic and to not let myself get out of my trading plan and rev up the margin or contracts simply because I am on a roll. That will surely lead to greater losses once a drawdown comes. Many crucial mistakes are made when one has a string of success because one gets a feeling of invincibility and there is no kryptonite better than the market. That is why in NOV and DEC I have avoided adding call spreads for more profits. I am happy just riding the last two months for a few % points more and not trying to hit the last home run in the last month or so. Like a prevent defense while still going for a field goal or two. I have not met any black swans with credit spreads or put ratio spreads which I traded a lot last year. I had one stock (GOOG) move against one of my put ratio spreads which I adjusted quickly into a bear put spread and closed for a small profit. I have had worse "swans" with short puts which I finally gave up on early last year after TASR incidents lol. My best saving grace is that in my early years of trading I never had a lot of money to trade with so I had to learn and trade while still having some money left over after any losses. Some people ask me if I am so good how come I do not have hundreds of thousands of dollars. Well I did not have a lot of capital or time in college and law school to trade so it was a slow road. I blew my account up once in the mid-1990's and the lesson stuck with me ever since. The money I lost was nothing compared to the emotional blow. Funny thing is now after reading Market Wizards I learned that those guys all blew up accounts early, some more than once before making their millions. I guess you have to learn for yourself sometimes but one thing I promised myself is that I would try to do whatever I can to make sure others avoiud the same mistakes I made. Hence the amount of time I spend on-line lol. My biggest accomplishment over the past 3 years has been tackling the emotional element of trading. A gifted athlete with no confidence is doomed to fail and the same is true with a trader no matter how good their skills are. One thing that helps my confidence is risk management. By actively understanding and working to limit my risk as much as possible, I have more confidence in taking positions and making trading decisions. Losses suck and piss me off but in the end I have no problem taking limited losses, since it is the big losses I am more worried about. I also feel many traders have unrealistic expectations and make unrealistic assumptions. That gives you a false sense of security and when that is shattered the trader's confidence is gone and so is the ability to trade effectively. Another problem is that many traders look for someone to follow as opposed to taking guidance to make their own path. Trading involves decisions based on specific thoughts and there is no way you can ever get inside someone's head and replicate their thought process and approach while feeling the same emotions they feel. People looking to blindly follow newsletters or seminar programs are not learning anything and therefore cannot succeed because they are not training their mind to independently think and trade. You certainly can learn someone's thought process to guide you in how to develop your own withon your own mental framework but those who follow are usually left behind. THis journal has demonstrated that fact that even though I have discussed my rules and approaches, many here have adapted this process to their own comfort and trading style Some take on more risk than me, some take on less, others are still learning the ropes, some have grasped it quickly and have run with it making it their own. Others have decided it is not for them. All that matters to me is that whichever decision you make is your own and not simply following me or my returns- that is not the independent thinking that a successful trader needs. Remember shepards make money by shaving the sheep lol. When experts shout at you and put you down about your strategies or approaches without offering any constructive advice, they are doing you no service and simply pumping their own ego. A good trader does not need anyone else to pump their ego-returns speak for themselves. So trading to me is more than a means for money. It is something I appreciate on a higher level and the money is the rewards one can reap. I also enjoy the shit out of it. Where else can you make money out of nothing trading imaginary paper lol. If you truly dedicate yourself to learning the art and respecting the market (for those who caught my radio show last week you heard my sermon on respecting the market) then you can be successful IF you develop the right skills. Well that was quite long winded and I apologize but I truly believe that if you approach trading like a complicated intricate art form with unique skill sets and requried effort and dedication, then you will be far more successful than looking at it simply as a way to make money or get rich.
I'm blown away by the level of maturity and thoughtfulness you have (for being such a young man). Yo momma and papa I know are so proud of you!
Okay, I'll play yin to Phil's yang on this one. I wouldn't know my EMA from my ass i.e. I don't pay much if any attention to TA including support and resistance. However, from a probability point of view, if you are basing on current ATM IV of Nov options 570 has about 22% chance of expiring ITM. 575 has an 11% chance of expiring ITM. For 22% chance of expiring ITM it might be considered prudent by some therefore to look at getting a minimum 22% return on margin for any spread you undertake at that level. The current fair market value for a 570/575 bull call vertical for example is about .55 which is 11% return on margin or about 12.4% return on risk. You probably won't get filled at the mid this close to exp. but on the XEO I personally get filled right at the mid quite frequently so you could give it a go. If you believe in probabilities then if you were to take this kind of bet many times - 78% chance of winning with 11% return on margin it should be clear that you will end up losing in the long run. That is if you just let the spread sit there and wait till expiration each time so make of that what you will. Those calcs are simplified a bit because your break even point is above 570 and a couple of other points etc. If however, you believe in support and resistance then you may think that puts the odds in your favor by placing the spread outside of those points. This is one small problem with XEO. This close to expiration (11 days) you will find it very hard/impossible to get any premium from way OTM spreads especially on the call side. Indeed, you will probably face the same problem elsewhere too. Momoney.
The XEO is right now at 561. I would be a little hesitant to open a 570/575 spread although personally I feel the market will be below 570 by expiration. However, the neckline of the head and shoulder pattern formed in the XEO from MAY to OCT was broken to the upside a few days ago. WHen this happens it is likely that the underlying will pullback or hover around that neckline and move back higher. Therefore there is one indication that as long as these pullbacks stay above the former neckline, we are still bullish. Also 561 is the 50% FIB retracement off the JUL high of 577 or so. This is a general target retracement point and therefore the market is hovering here. The FIB retracement does not let me know if the next move is still higher or back lower but what it does tell me is that we are merely pausing here and a move in either direction is coming and could well be higher. Combine that with the above and the move could be higher. The FIB 66% retracement is around 566 so perhaps the market will pause there as well and buy you time. 570 would be a 6-week high but no out of reach. One or two surges in the market and 570 is on your doorstep. The 570 strike has a delta of .19 which is close to money's estimate of about 22% probability of expiring ITM. I think we got a mixed bag of messgaes here. You would probably only get about $0.55 or $0.60 for the spread and the premium disappears after that so follow-up adjustments would be hard to do. Given the temporary pause here and potential for continued surges I would pass on the 570/575. Phil
Thanks Momoney. Looking at probability and amount to expect from a spread is interesting. (Before, I just looked at support/resistence and kept the delta of the sold option (<.15)) Do you ever see prices where you can get a fair amount based on probability? i.e 1.1 for 22% probability on a 5 spread? When the index moves probabilities change and also prices. So how do you figure if a spread is expensive or cheap? i.e. you are getting a fair/good price. Thanks