The last couple of months have been really good for bear calls and I did very well. Since I've been posting my good results I need to be fair and post the losers as well. This month I placed a stupid trade, SPX 1300/1315 bear call. The reason it was stupid was because it didn't really meet my criteria. I knew it was a bad trade when I didn't even openly post it in the forum; I hid it in a response to someone else. That should have told me immediately that I was not comfortable with the trade. I placed it out of greed, because I had booked July and August spread credits in July (almost doubling my typical monthly intake). I wanted to keep it rolling. The day after I placed it, the SPX was up 22 points. I had the chance to get out about a week or 10 days later for a $0.20 profit and didn't. Fortunately, it was only a relatively small position and isn't affecting my portfolio value too much. When I closed the position, I adjusted to another bear call (a day later at much lower credit than I would have gotten the day before) and added a bull put spread. Poor adjusting on my part. So what did I learn: 1) Adjusting is necessary when the price gets close to the short strike and I need to not fear it. It's part of the arsenal and has to be embraced as part of the strategy. 2) Greed and hubris are probably the two largest factors that can separate a credit spread trader from his money. I wound up losing 7% on margin this month. Again, fortunately it was on about 25% of what I normally commit per month.
I'm curious about how the following diagonal would have been settled this month. Assume the following position: BTO SPX August 1325 call STO SPX September 1300 call If one had not adjusted this diagonal, how would it have settled today? The Sept. 1300 is ITM and the 1325 disappears as the hedge. So I'm wondering how a typical broker handles this. You're essentially naked. I guess it doesn't really matter that the Sept. short is ITM or OTM, it's naked. Does that mean the broker would close the position if the account can not make the margin requirement?
Murray, I guess you are joining vtradergroup. I wonder if you can share with us the cost of joining it. I might consider joining them too.
ToS.... allowed me to push through the Friday Morning. IOW, I could sell my 1325c and not be considered naked, although you have to contact them to do so. The software isn't set up to do so. But, as soon as SET is annouced... you're back to normal. Don't know about OptionsXpress, IB, or TradeKing. M~
Yip, Series 7 required since they are a Broker/Dealer. A few $$ to join.... Minimum 1 million personal assets (SEC rule) Minimum 25K trading account You may consider banning together as a group in your area.. as we are doing. Only the controlling person is liable for the Series 7, and if you merge accounts.... you'll gain the benefits of cross-margin on various indexes, ETFs, and securities. We're setting up a group account and distributing all losses and profits amongst all the accounts equally. We have received many emails to join the group. We have considered outside resources for the group, but until we get familiar with the process, we're going to refrain from opening up to outsiders. I'm sure down the road that will change. If you would like information.... contact: Maverick, alias John Knott @ VTrader Pro www.vtradergroup.com John Knott 312-516-2200 Maybe coach would consider starting an E.T. 'prop account' for ET participants.... now there's a grand idea! Enough people have already PM'd me from this group to start an ET prop firm.... it may be worth consideration. Mid-Term Election ET 'Prop Firm' Party Ticket President - Coach Phil V.P - VolatiiltyPimp Secretary - Mo Treasurer - Rally PR - Donna V ?
Murray: The position is a reverse diagonal, i.e. the short option is in the back month. I think your response assumes that the short option was in the front month.
An ET prop group account.... now there is an interesting idea lol.. Probably requires a lot of red tap for registering.. damn bureaucrats...