<<< There is one other very important point you have been trying to make that I don't think people understood. If I max out my cash providing margin for my spreads and the market crashes going below all my spreads and stays there for the duration of the spread I am broke. Nil... Nada... end of story. Once the spread is expired that money is never comming back. While if I am instead put stock... stock is forever. It doesn't expire and I could simply wait the time it takes to bring it's value back. 5 years... a nuclear winter... and so on. And I think you were trying to say that if you are doing these spreads it's important NOT to use all your cash for margin and to allow money to take stock puts to survive such a market wide disaster. I agree with that. >>> EXACTLY!!! You are actually the first and only one to acknowlege that issue, which I've been trying to warning spread investors about. They seem so comforted by the idea that their potential losses are "limited" to and by the spread gap, that they don't realize how quickly their account value could be 100% wiped out.... no 2nd chances. Hence the reason NOT to use all your account cash on spread investments. Hence the reason to keep a reasonable cash reserve, so you have the ability to "consider" buying some or most, of your stocks going bad. Hence the reason why there is a risk difference between a $15 (2.5 gap) spread and a $50 (2.5 gap) spread. Hence the reason spreads "may be" even more risky, more dangerous, more difficult to manage, more unpredictable, more volatile, more stressful, and can wipe you out a lot quicker than even selling naked puts on margin,.... if you don't manage a spread portfolio's risk intelligently. ((( I am NOT encouraging investors to sell naked puts on margin))). Intelligent spread investing means having a plan "B" in mind, BEFORE you initiate a strategy composed of selling spreads. Thank you for your participation in the discussion.
OK, so you cover the long side of the losing spread and let the deep ITM deltas ride. Now you're naked short w/no hedge at (nearly) 100D. You're stating that you trade these cash-secured, and I doubt it. All I see is an exercise in being right/loss avoidance.
ok.... now for one.. i would like to say.. Put_Master aka puddy man.. has been trying to say the same thing for a while... and there is not one person that doesn't get what your saying..... Obviously if anyone is unaware of the risk of ruin in putting all your money up to cover the difference between strikes in credit spreads they will soon find out the risk.. This is only one of the many many risk of ruins out there.. you seem to like to focus on it.. which its my speculation its because you like to leave yourself a huge margin for error by just selling cash secured puts and putting yourself at the risk of waiting years for stocks to recover.. Another thing.. whats a Married put.. its simply a long call in two parts.. similar to a call backspread... just the same as a short put has the same profile as a covered call... which ones are long convexity which ones are short.. your short convexity.. your pay off structure is concave.. your betting that over the long haul your short put slash covered call recovery program is gonna produce larger profits then more detailed strategy applications... there are so many ways to express your views on volatility.. delta... etc.. but you speak in such generalities about spread traders over positioning/ over concentrating.. its a redundent topic ... any of the contributors to the threads on this topic .. ALREADY KNOW THIS.. i'm not being a jerk off by the way.. i'm just expressing myself to my full capability now i'm living my life in a correctional facitlity .. you to boy if you mess with me .. the police are going to have to come and get me off your A@#$@
putty man.. this is a good strategy for you.. maybe you know when you get put the stock.. you could do this.. that way you don't expose yourself to further downside like Atty stated... Costless Collar Construction Long 100 Shares Sell 1 OTM LEAPS Call Buy 1 ATM LEAPS Put <a target='_blank' title='ImageShack - Image And Video Hosting' href='http://imageshack.us/photo/my-images/215/costlesscollar.gif/'><img src='http://img215.imageshack.us/img215/3596/costlesscollar.gif' border='0'/></a><br>Uploaded with <a target='_blank' href='http://imageshack.us'>ImageShack.us</a>
or putty man... read this guys blog.. you'll like this strategy i'm sure http://blog.radioactivetrading.com/2012/05/what-on-earth-is-a-nested-spread-trade/ your basically selling a short term bear call credit spread to cut your cost in your protecitve put.. that way you can sleep at night... plus.. here we go wait for it.. THE BEAR CALL CREDIT SPREAD keeps you from losing your upside if the stock shoots up.. defined risk strategy.. let me say this again.. because you spread in the bear call credit spread instead of just sold the call against the stock "covered call" you now haven't limited your upside.. you combine this with some volatility trading techniques... so your making the most of when your selling your bear call credit spreads.. taking advantage of the term structure and the theta differentials between the put leap and the near term credit spread..
You're serious? The guy buys the Oct put at intrinsic? Magic! The result is that he's telling us he bought the synthetic Oct 60 call at $0.00 against the bear spread. Scam. "Kurt Frankenberg" is a knob.
no its not magic.. they are outright lies.. haha this radio active guy is selling a book of "bulletproof" stratigies.. more sales crap..... Theres a hell of alot more to making money then this guy puts off to.. listen to the guy.. he is like guy smiley with his speech about it haha.. "and when you then sell the call spread.. you win a new car!" haha
another thing it assumes is that you don't get killed in the bid and ask spread in the back month options ... say for example.. you put on this spread.. stock rises to bought strike of bear call credit spread... umm then your stuck with what to do if you wanna just straight exit.. cause you selling all those leaps (puts) is gonna freaking cost ya.. the more you look at it.. the more you realize how much more aware of things you need to be! haha cause basically this strategy structure does well when front implied volatility isn't ever higher then realized ends up being .. and the back month is under priced for what it ends up being worth.. seems more like scapling front month bear call spreads against stock and leaps.. ya know
<<< Put_Master aka puddy man.. has been trying to say the same thing for a while... and there is not one person that doesn't get what your saying.......there are so many ways to express your views on volatility.. delta... etc.. but you speak in such generalities about spread traders over positioning/ over concentrating.. its a redundent topic ... any of the contributors to the threads on this topic .. ALREADY KNOW THIS.. >>> I'm obviously not speaking to investors like ATTICUS and other regular posters. I've made it clear that my message is for inexperienced or uninformed investors, who may not understand the true risk of initiating bull put spread type strategies. And based on the response I've received from DanShirley, he is a perfect example of who I am directing my messages to. And I am sure there are, or will be, others who are similarly misinformed as to the potential risks of that type strategy. And frankly, based on your past comments, you are also an example of someone who thought the "strategic and potential risk", of selling a portfolio of $15 (5 gap) spreads, was the same as selling a portfolio of $50 (5 gap) spreads. I'm glad to see you now acknowlege the difference. BTW, I only do cash secured puts, until i decide to sell them on margin. Usually when there are about 2 weeks until expiration and the majority of those trades are still otm.
i must have been unclear of my aknowledgment... there is such a way to volaitlity adjust those two examples such that the 5 wide 50 dollar stock has less risk then the 5 wide 15 dollar stock.. is the point i was trying to make to you.... you previously said some parameters.. "all being the same" like time to expire, distance in percentage otm... " but you left out a volatility assumption and thats what i was trying to get accross to you.. All things being equal (i don't know when that ever happens.. except in a crash and even then ) yes a five wide on a 15 stk is different then a 5 wide on a 50 stk.. and yes.. beginning options should know the risks about spreads their related margin requirments.. and most importantly "position sizing" becuase most times in options the amount you have bought in premium or the amount you have on margin IE cash secured or strike wide requirment ends up being your margin requirement and the amount you calculate your risk to reward ratio upon.. and just to disclose ... I have put 30k up on a aapl credit spread trade before as well as a few other large amounts.. which 30k at the time was my entire account just about and my risk of ruin at that particular time was as you would say.. rather high.. haha but as i've said before i woke up in the middle of the night upset realizing this strategy ends my trading life rather quickly.. But i got away with it and made tons of money as a result.. absolutely not recommending.. as this is only one example of the many stupid things i've done.. i'm lucky my intuition has caught me in bad trading habits before ruin caught up to me.. at this point i've done alot more reading then trading.. i've got hard set on ratio backspreading , small position credit spreading.. selling puts against cash...and i was soon to be iron condoring on a little less jump risk asset like an idex or etf with high liquidity.. that being said.. i would rather consider myself the fool and find out i'm not... then be arrogant and not track down all my potiential risks.. my current situtaion that is hurting me is a vixy trade roll costing my money away.. trying to figure out what to do about that.. I am willing to take the loss i'm in at 32 and its trading at 26... sell calls... sell call ratio backspreads for credits and wait it out for volatility to come.. or realize i didn't know all my costs upfront and apply the rule of get out when you don't know wtf your doing... THOUGHTS ANYONE..