Phil, My OCT 1160/1170/1265/1275 is now worth 0.70. I received 1.45 credit for it, so I'm at around 50% of max profit. I'm wondering if I should close out and roll to Nov or stay put till OCT expiration or thereabouts. I am unclear on the logic/thought process/tradeoff analysis to get to a decision on this and it would be great if you could share some of your thoughts.
There is no magic formula here, it depends on your own preference. Some people prefer to hold close to expiration and then roll, others like to take profits as soon as possible and roll to next month. I have done both as seen in the thread. I just go for the money where I can get it. If you like the NOV spreads a lot then you can close and start loading up on NOV put spreads far OTM and wait to leg into call side. Why not try an agressive limit price for the spread at maybe $0.55 and see if you get filled. If so, then today is a great day for OTM put spreads at 1140/1150 or 1150/1160 or for those who like a little more, 1160/1175. NOV is 45 days out so still time to grab NOV. Phil
Sorry mode, missed the question. I like to try and scalp the last 2 weeks or so if after a nice price swing I can grab OTM spreads still outside resistance/support and not too close to the index if I can grab another few % from it. For example, on today's dip, if I had margin, I could look at 1170/1180 for OCT if I had some more space. Still 40 points or so OTM but due to the dip I can grab some nice credits and 1205/1200 support still are in place. I do not have a specific approach, I just kind of open my eyes on a nice market move and if I have some free margin I will try and grab a trade during the last 2 weeks perhaps. And as for improving you as an option investor, I can lead a horse to water but I cannot make them drink, so you still had a lot to do with it Phil
Coach: I've seen the term "scalp" used a lot with regards to trading, but I'm not sure what it means.
Had the following trade filled today: 1130/1140 SPX Nov bull put spread filled at $0.60 Had the following trade filled last Friday 1290/1300 SPX Nov bear call spread filled at $0.55 Pretty decent credits on the 10 point spreads for November in comparison to what we've been getting the past couple of months. Some of that is probably due to some luck in timing the entry.
You are right about the word scalp and I have seen many people have different interpretations. Here is an official definition I have seen: "To trade quickly for small gains, often holding a position for less than a day." For example, I day-trade the E-mini futures and I scalp because I look for 1/2 to 1 point gains in short-term trades. I use the word scalp for those trades we are discussing in the last week or two before expiration because they are relatively shorter than my usual time frame. I see people use scalp when they refer to time periods of trading much less than their normal time frame as a term of art. So when I say scalp, I am implying that I am trying to grab small gains in the last week or two before expiration in addition to my normal spread or IC positions. Also it is just a fun word to use with respect to trading... Phil
Phil, You've talked about your Emini trades. I'd like to hear a little about your system for placing those1/2-1pt trades
Several posts have listed a desire to list trades from other websites and paid services. Hey, I want something for free, too. I even saw one person post a trade from another service I subscribe to. This practice is morally wrong and probably a copyright infringement. I urge members of this forum to consider that the people writing those newsletters do so for profit. Posting their notes without their permission is in essence stealing intellectual property. I do enjoy reading other's trades and reasoning. This concern does not apply to those. It's FABULOUS that Phil is generous enough to teach and provide this FREE forum for his Ideas. The trading world is a better place for it!
I am refining the system each trading day so I it is still a work in progress but I can outline how I approached the subject which might be helpful for new traders or traders looking into new securities. 1. I had been trading the SPX for quite some time and wanted some more ways to trade the index, perhaps more frequently so I began looking into E-mini futures. 2. I went to the CME website and downloaded all their working papers on futures and E-minis and what they are, how they work, contract specifications, pricing, and watched the quotes. 3. After studying their great educational information I began browsing different books on futures as well and bought one on trading commodity and financial futures. It was basic to intermediate but I wanted to pretend I knew nothing and start from the ground up. 4. I subscribed to TCNET2000 live charting software and begain charting the S&P using 1 minute, 5-minute and 15-minute live charts along with the TICK indicator which I also studied. 5. Using the charting system and historical data I would scan the charts to look for patterns and see what worked and what did not work and how the TICK reacted. 6. After about a month of that and becoming fully familiar with the E-mini SPs, I began trading 1 contract at a time and making notes on the charts regarding good or bad signals and trying to find the consistent signals. 7. I then upped it to 5 contracts per trade with a goal of 1-point per day. Steps 1 - 5 I did from April until about early August and then started trading with real money September 1. Despite the study, some more lessons needed to be learned with real money. Well I feel honesty is the best policy and here is what happened in Sept. I started doing well and went up $1,200. Then I strayed from the rules and also learned some additional lessons the hard way and was down ($3,000) after mid-month. Well the lessons learned kicked in and I ended the month UP $250. It was especially harder since I kept myself to only 5 contracts and 1 point is only $250. Well it is OCT and I still am doing 5 contracts although I am starting to work on upping it to 10. My goal is 1-point a day. SOmedays I grab 1/2 a point or make 1.25 point and others I lose 1/2 point so assuming losses with tight stop losses based on my indicators I want to NET 3 points a week using 10 contracts. That is $1,500 a week. realistic or not, we shall see but it is a work in progress and as you can see from my steps I do not take this lightly. So I would rather not go into detail about my set-ups or indicators since futures is certainly riskier than options in many cases and I do not want to guide the unprepared down that route or take away from this thread. Also, my trades last anywhere from 1 minute to 15 minutes and it would be too hard to post any real-time info. But i wanted to describe how I went through the process to show you what I believe is the right way to approach trading a new area. Research thoroughly then start small. I am using 5 contracts right now which is about $20,000 in margin so I compared to my option posiitons I am using a small portion of my account. 1 contract is just under $4,000 and that is why I started with 1 for a few weeks. Hope this has been helpful. Phil
I have a 1160/1170 Oct SPX credit spread right now. We always talk about using delta as an approximation for the probability of the option expiring in the money. Right now the delta for 1170 is .14. I ran the numbers through a probability calculator and got .048, obviously a big difference. I noticed that the IV has spiked recently with the drops we have seen from about 1226 down to 1207 over the last few days. Is IV the only contributor to the difference between the rough delta estimate and the calculated probability? ryan