At every seminar I have been to they DO NOT even mention SPX as a trading vehicle other than don't trade it they prefer the smaller indices which for most traders is probably the best. While I do not disagree with them......I've been making money on these FOTM SPX trades....so far
nlslax: I was a little surprised that you were asking me these questions, since I've had the impression, from your posts, that you are a sophisticated retail trader. But you're right it's the emotional side that we are all victims of. I lost about 25% of my account over the summer due to some real arrogance (after being successful for months), then followed by stupidity after the #@* hit the fan. But with the help of this forum, I've righted the ship and am back on track. Right now my biggest problem is sticking with the nickel and dime approach. I have days where it's a real struggle not to place a very high reward/very low probability trade (for example, my GOOG trade last month). It's gonna take me over a year to get the losses back, but I have to keep reminding myself that I'm learning skills and an unemotional approach that can last me for a lifetime of trading.
didn't see the second paragraph...they do emphasize the importance of the over-all portfolio management...and yes it is important to weigh each trade within the position as to how it affects the overall position as well as the portfolio. I guess that is why they don't recomend too many stocks,etc. My only question then is what about diversification?
Very true. Being right pays off very well in the long run. Hitting alot of singles pays off very well in the long run. I used to trade that way, have slowly moved away from it. I should have realized it when I noticed I was spending too much time during the day watching my account. I need to remind myself that good consistant trading is a journey, not a race. Time to reel this boy back to reality. That's all for now. I've used up my daily allowance of metaphors.
For index, they suggested SPY instead of SPX and recommend IC. After so many positions mingle together, you look at total greeks instead. Then you hedge you delta risk by reducing it to your own comfortable level. The key thing is to keep generating Theta and hedge your portfolio. If there are short calls/puts in the money, leave them alone until there are 5-10 days left. For example, you start with IC but then your net delta become 200 because SPY went down. You decide that you want to reduce delta to about 100, you sell call spread to reduce the delta. I adopt their trading style in SPY but be more directional. I also use Coach's stretegy to far OTM on SPX. Both produced good result since Dec. However, the market was trending up too.
they look at all the trades as ONE portfolio. they would pepper the market with positions like buckshots... longs, shorts, calls, puts... some at one sigma, others are at 2%, more at 3%, etc. ... eventually, when you look into the pot, you might identify an IC here, a calendar there, or was it a prego? or ratio? ... well, it doesn't really matter, because they would add up all the positions to form one portfolio... and they would let the worthless contracts expire... or roll into more credits... and add more to the pot once in a while... they do it in such a way that the uninitiated would think that they are doing it haphazardly. But there is a method to their madness. The secret is, they manage everything by the greeks.
George Soros is buying put spreads. I think he has a small account at TOS. http://money.cnn.com/2006/01/27/news/international/pluggedin_fortune/index.htm
You can use VIX (the bottom chart) as an intermediate term market direction indicator. It works very well. And it indicates sideways markets too. The bottom chart is basically two MAs of VIX. Have fun!
Coach, Thanks for your input. Do you know for the same range in an IC, if SPY offers the same premiums as SPX or if one have better premiums and faster fills than the other? Bob