SPX Credit Spread Trader

Well dont i feel stupid now, no wonder i got a quick fill. The guy who took the other side got him a .15 cent arb. ahhhhhh

 

Just how broad would that Fly be? Just curious...

 

Well the put ratio spread was 1200*1175.

So adding the 1150 strikes would result in a 1150/1175/1200 ES Put FLY for July.

Could have added teh 1150 strikes for the price of my original credit or at best, for a credit of $500. I preferred to scalp the $4,500 for the day and look for a new entry.

 

FWIW, I believe that was the right decision.

Logically there is less justification for adjusting into a different position if the probability of winning on that subsequent position is low and not consistent with one's forecast, positive expectancy or not.

If the put ratio was initiated closer to the money, the case for conversion might be greater.

2c for the day.

 

Or as Cottle would put it, would you enter into that adjusted position as a new position now looking at the market, and the answer was no.

IN all honesty, if the net credit from adjusting was at least $4k, I would have done it and banked the profits along with the free lottery ticket and still looked for another entry. But for no credit at all.... NAHHHHHHHH

 

Let me do one better. I am sure many people on this thread who havent read Cottle's books will find this helpful. A direct quote from his last book that i think is at the heart of the adjustment principle.


"To decide whether an adjustment is really something that traders
want to do, it is important to realize that they must like the current price
(alternative cost) of the adjusted spread. In other words, they should
look at the spread that they will end up with synthetically, and then
assess its value and their reason for putting it on. This is the point where
understanding the concept of synthetics separates the women from the girls. It is better to think about the most basic risk profile in the most
simple8 terms (i.e., synthetic terms) as opposed to the actual price terms.
At every stage in the analysis of the alternatives and adjustments to
a position, traders should ask whether they would put this spread on
having had no position whatsoever. They must make the decision based
upon the “fair cost” disregarding all the previous prices paid or received
(actual cost) on the aggregate spread. If the answer is that they “would
not put on the trade”, then this particular adjustment is not right for them.

Their thinking should be consistent whether the position has just been
initiated or has already been on for some time. The trader should get out
of the position if the risk / reward profile is not attractive from this point
forward. Some of the most important revelations for traders occur when
they understand at what point they are contradicting themselves. This is
when the “lights go on” and they really learn from their misperceptions." -Charles Cottle


Not sure if i am breaking any rules by posting this, so apologies in advance.

 

Well, I'm going on vacation next week. I'll be disappointed if there aren't at least 200 posts that I have to wade my way thru when I get back requiring a minimum of 4 hours of effort. Mo, how much do you charge to summarize the important points of a week's worth of thread postings

The only positions I have are 1355/1370 July bear calls, so I should be safe. So that this isn't a totally "fluff" posting, I'm gonna ask Coach how he handles his open positions when he goes on vacation, esp. now that he has a prop account. Coach, do you close everything and just enjoy yourself; or do you leave relatively "safe" positions open and check the market once or twice a day?

As long as my better half doesn't notice, I'm planning to print out a number of Cottle's Coulda Woulda Shoulda chapters and read them. We're heading to Cancun and I'm not really a lay in the sun kind of guy, so I need something to keep me busy.

I guess taking Cottle on vacation means that I've passed the point of no return. :eek:

BTW: Which thread is Cache Landing's thread. I'd like to start lurking on it. I've always enjoyed his postings and he doesn't seem to be posting much here anymore.

Hope everyone has a good coming week.

 

I'm around occassionally but I've got a whole bunch of stuff clamouring for my attention right now. Trying to get a certain business venture off the ground. I've logged in to ET only to have the screen sit untouched until I close it several hours later. Definitely don't have the time to keep up with the posts on this thread.

Anyway, my journal has fallen down the list a bit since I haven't had time for it for several days, but I will update it in the near future. I'm really conservative for the next week or so though. Trying to get a better read on the market sentiment. Also tweaking a few of my strategies so that they will work more efficiently with large ($20MM+) accounts. Trying to trim a little fat off I guess.

My thread is http://www.elitetrader.com/vb/showthread.php?s=&threadid=63020

 

What is a vacation?

If I am away from the computer for a vacation then I do not daytrade at all naturally. If I have credit spread positions, I just check in once daily just to see what the market is doing. If I am still far OTM then a simple peek at CNN or CNBC just to see the move for the day is enough. I do not get anxious or need to look unless the index is close. Last summer when I took a cruise for a week or so, I just logged on to the internet every other day or so in between events.

 

I'm printing out chapters 1 thru 6 of Cottle's Coulda Woulda Shoulda; the free download.

Didn't I hear somewhere that it contains a lot of errors. Can someone verify this one way or the other for me.

Thanks.