Good question. Of course the short answer is, it depends. It depends on the capital in your account and your experience and risk tolerance. I would say that starting out you certainly should look into using as margin a small % of your total account. With IB commissions are not much of a factor but a 10-point spread is $1,000 in margin. If you have an account of $20,000 then using $5,000 max would be a good place to start. You can do both call and put spreads with the same $5,000 (same distance between strikes for Iron Condors) and therefore not put your whole portfolio at risk. For bigger accounts, you can of course up the %. For accounts under $10,000, unless it is completely discretionary money outside of your regular investments, I would not start with more than 1-2 contracts until you felt comfortable. This is all subjective of course and some may feel comfortable using a large percentage of their portfolio initially. I wish it was easy to devise a straight forward formula. The closes I can come is with a nice size portfolio, start with 10 - 20% at the most and work your way up as time goes on depending on how much risk you want to take on. Phil
My thought's as well. I just got out of the OEX bear call for a Debit of .10, and I took in a credit of .35 on that side, so I made a total profit of .25 on the bear call (minus $50 in comm) and should make the full .65 on the bull put, for a total credit of .90...not too shabby. I hate paying commissions to close out IC's but RISK MANAGEMENT is #1. Like they say, "a bird in the hand...." I'm trying to close out the bear call on the RUT 690/700 for .10 but the bid/ask is 0x.25, so no one's takin the bait. I would caution others about trading the RUT, compared to the OEX/SPX/NDX it's a very stingy index to spread, and the MM's are notoriously slow to fill your orders. I'm giving up on the RUT after this month and moving to the NDX. On another note, after reading through this fourm, one thing I think still needs to be addressed is the technical indicators Coach uses. I'm just a beginner when it comes to tech analysis, but I'd love some information on how your Prophet Java charts are setup with support/resistance and any moving avg's. For example how far out do you look on the charts? ; what tick interval? Any other studies? OX allows you to save a chart as well, maybe for the OCT spreads a chart could be posted of the SPX? Thanks for all the good info, and let's keep filling our coin banks. Shawn
If you are having trouble getting a fill then you might also look into the 1150/1160. I think those strikes are still a good safe distant for October and you might get the better credit. Phil
I was looking at the 1150/1160 - but I thought I would dangle the bait on the 1140/1150. It's like bass fishing, throw the lure out there and see if you get a strike. You have to cast a lot of times to get strike. Thanks Phil for your excellent work, training and attention you put in this. You have certainly opened my eyes to some new trading ideas. God Bless Hootie
osho67, From reading your posts, my suggestion is that before you trade real $$$, you need to start reading up on what exactly vertical spreads are and how you can use them effectively to make real $$. Everyone needs to start somewhere, but the worst way to start trading is without a core understanding of what you are actually trying to accomplish. There are a ton of great educational tools provided by the options institute. Here are some great web sites that will help you along: The OptionClub SPX Iron Condor Chat http://www.theoptionclub.com/Articles/spx-iron-condor.html Vertical Spread Tutorial http://www.cboe.com/LearnCenter/Tutorials.aspx Education Webcasts http://www.cboe.com/LearnCenter/webcast/archive.aspx Trading Vertical Spreads Credit Spreads and the Iron Condor--an OIC Presentation The A-B-C's of Index Options Online Free Courses: http://www.1888options.com/university/classes/class_descriptions.jsp# Also, setup a account with OptionsXpress and you'll have full access to their site. I don't believe they require you to fund the account for some time. They allow you to paper trade spreads so you can explore trading through this vehicle. The most critical part about spread trading is Risk Management and how to adjust or close when the trade goes against you. But to manage your Risk effectively, you must understand *what* you are risking. Good luck, and trade smart! Shawn
Thanks Skdoyle1 for the great links you have given in your post I will be reading them and be more educated. I am happy to say all of you are very helpful on this thread.
What a beautiful day in the market lol. There is just too much headwinds in this market to push higher right now. Good day to look at OCT put spreads tomorrow if we have a flat or down day. In the home stretch for expiration! Phil