Jeff, Do you mean the margin for ES 1260/1250 spread is $400 for each contract? If so, the credit over margin ratio is 2.5*50/400 that is slightly higher than 25%. It doesn't seem span provides a higher leverage for spread traders.
I will do you one even better... $1.25 reward on actual risk of $8.75 (difference between strikes minus credit received) $1.25/$8.75 = 14.3%
The return is a factor of the risk. If the short strike has a higher liklihood of being ITM at expiration then the premium is higher. The risk is $8.75 which, as with most credit spreads, is high and the position must be managed to avoid as best as possible the lart moves.
Hi I have ben following this good informative thread for a long time. I am thinking of setting up a LLC with my retirement a/c as a partner. Can anyone guide or help me how can we do this. How much this should cost? What precautions should be taken? Thanks in advance fumablanc
I agree that the risk is high. The probability being expired worthless is around 80% using 27% vol. But I expect the vol will come down before Fed meeting. No risk, no reward. Option premium is actually risk premium. Higher risk, higher premium.
yo,yip! easy on the Big Russ 45-50 pt move in less than 1 mo, no problem for R2K, even on upside will feel like you TKOd in K1 by Bobb Sapp http://www.youtube.com/watch?v=RaKjk43BJxc&search=bob sapp