I have. Since learning this, I have done three round trips on the MNX since learning this and made money each time. I guess Im too stupid to know I dont have an edge. Mike
Good job mbradley! Yeah, you better give that money back. You are not allowed to make money if there is no edge there. Some new SEC rule or something. LOL.
Mav, I will agree with you here, trading backspreads, and long premium in general, is tough work. I say this as somebody who basically makes his living doing it right now and who blew out twice long juice in Chicago; trading backspreads is a shitload of work, you can't miss a day(this is assuming you actively trade and don't put on a position and forget about it for month). It is the most discretionary type of trading you could do. If you did this in the same stock day after day, you'll eventually lose unless you are a damn fine stock trader. Ultimately that's the problem, if you can't trade the stock consistently, then why bother putting it on year round. I disagree with Mav that you couldn't have this on from time to time. Like I said, discretion plays an important role when it comes to backspreading. If you choose your points wisely, the chances for profit are greatly increased. It may not be possible to have such a position on in any one stock consistently, but unlike Mav and I as market makers, we have a ton of choices as off floor traders. Most of my backspreads are, in reality, little more than glorified straddles. I find it's helpfull to think more along these lines. And, I remember seeing Mav's comments when we were trading the biotech stock, gnta, thinking when the hell did he become a long vol junkie. It seems that it is only true for binary events. Myself, right now, I'm backspread GE and CSCO. I could, if it would last more than a week, do a journal which chronicled that backspreading can be profitable. My previous journals didn't last that long because of laziness. Mav, what's your bet?
Further thoughts; probably both Mav and I got sucked into trading long premium because of one thing, it is sexy. Let's face it, who doesn't want to make 5k or 10k a day, which unless your well a endowd short gamma trader, is tough using that strategy. But volatility sucks you in like nothing else, when you're long a ton of puts the news stories from the last couple of months are the equivalent of crack. One day during the Asian crisis of the last decade, I made 50k. It fucked me in many ways because I became addicted. My attitude now is very different and don't expect those paydays. Mav's perfect posistion is admirable because it tries to be neutral. The problem I see is similar to Nitro's, the problem isn't legging into a spread, it's legging into several spreads for the creation of this position. Anything you may gain will be taken away with the vig, if it's going one way or another, just put on a backspread.
It's good to see you posting again Trajan. Good comments. Actually, I got sucked into trading long premium when premium was always going up. It was very easy to bottom pick volty. Sooner or later, it would always pop. I am a new man now though. I am a dedicated short gamma trader and I would probably fall under the heading of swing trader if you had to classify my trading style. I just find that I can put on the same position as you with short gamma with a lot more edge and construct my deltas in such a way to reduce my risk substantially. I've also shortened my time horizon on my trades to increase turnover. As far as the Perfect Option strategy goes, I always made money with it. You know, I say this a lot on ET and I might as well say it again. I have a general rule in life I like to follow. And that is, when something works for somebody, I never question them, there is no need to. Regardless of how one trades, if you can make money doing it, then do it. How stupid would it be for someone who employs a certain style of trading and consistently makes profits only to stop doing it because somebody told them, that won't work, when in reality it is working. It's like a diet. You always hear people say that won't work and this won't work, but if the person is doing it and losing weight, who cares, let them do it. Everybody's body is different. Each of us react differently to diet and exercise. Well, the same goes with trading. You can take 100 people from ET and let them trade the same strategy and because we all think differently, because we all have different experience, two of us will not trade that same strategy the same way and we will probably get 100 different results. This is what irks me about ET. People will say you can't make money trading NYSE, or you can't make money trading nasdaq, or you can't make money daytrading forex, or you can't do this or you can't do that. Well, if you can do it, then do it. Some people like to trade covered calls, some people like to trade long gamma, some like short gamma, some like to pair trade, some like to play volty dispersion, who cares, as Phil Knight said, just do it! If you can't be an independent thinker, you won't make it in this business. If you have to listen to others, this is the wrong job for you. You can't just copy and paste a trading style from someone else and make millions. Trust me, it's not that easy. You know Metooxx had a great line from years ago here on ET when someone asked him how he traded? His answer was, we do all the things that people say don't work, and we make them work. Now there is a guy that is making money. I guess that is why he is trading in the Bahamas on a tropical island and others here are looking to copy and paste. Trading is like anything else in life, you have to be willing to be the lone wolf. When you get to the fork in the road, you have to be willing to take the road less traveled. Only the most disciplined, the most strong, the most independent can endure such a trip. To be willing to defy the gods of trading and popular opinion and believe in yourself enough and have the conviction to do the right thing. That is a trader gentleman. And only when you reach that point, only then are you going to figure this game out. Until then, sign up for all the chat rooms, buy all the books, go to all the seminars, listen to everybody else, copy everybody else and follow the crowd. At least when you get to end of the road, the road of failure, you will have a lot of people with you and you will have plenty of drinking buddies. Haven't you ever wondered why the bars are full of 60 year old men talking about how good they could have been over a beer? Bar stool after bar stool, they all travelled together and they all ended up at the same spot. The question you have to ask yourself is this, are you willing to walk alone? I can't answer that for you, you'll answer that when you become a trader. And btw, Trajan, when I use the word you, I mean the trading community. LOL. Good luck everyone.
When you wrote about trading within an options position it was some of the most interesting and informative reading in an otherwise sea of nonsense and egos. Give it another go if you're up to it. Quah, if you're out there, same goes for you.
Palawan, I think I have contributed more to the ET options forums then anybody else. I really don't know what else I can tell you. I have tried to be honest and forthright. For some people that is not enough. Everyone is looking for a magic pill and I hate to say this, but no such pill does not exist. All I can offer is some basic advice and my experience. Everything beyond that and we are discussing semantics. I hate to be so politically incorrect here but it's the truth.