Eudamon Your Put backspread, seems to be similar to this mechanical method I am trying. Overlapping straddles. Though in my case, you drop and lose the LOSING OPTION side and carry the winner for double the distance. While in your example, you sell the winning side immediately and take your profit and carry the loser for hopefully the eventual reverse, increasing the overall options. Your method counts on not losing anything if possible, though I would think THETA would possibly cause this sometimes. Im anxious to try it, as I do believe and you didn´t mention this is a long straddle system you suggested. On the other hand, for cash money, I am undercapitalized right now, so will immediately go for FOREX FOREX system as that will keep me out of violations of the DAY TRADER RULES. If you leg into Long Straddles I wonder if they count each side as a single trade? If that is so, it looks like I would only be able to do two underlying stocks, or whatever per week for a while. Of course, I can increase the amount of contracts used. I believe that would limit me to two trades per week in Long Straddles legged in, but will have to look it up under the Day Trader rules. What would be the best candidates Forex Forex? I presume GOOG and QQQ? Or maybe GOOG and GLD? I´ve heard third hand that GOOG swings $10 a day in premiums, so it does look like it might have the built in volatility? I´m not going to increase my account, unless I make back the money lost and bring the balance back to starting values.
Rarely a long premium, delta neutral position will provide profits untouched to expiration. When you put it on, is because you expect something to happen, i.e.: Price to move fast one way, or the other, or either, or volat to explode or implode. What will make or lose you money with this, or any other strategy, is your ability to put it on at an opportune time and to take profits/losses/close it/exit it when whatever happens occurs. Every minute, hour or day that passes, something new occurs, and you are already prepared to re-spond to it. Basically you want everything that you execute afterwards to improve upon your position, decreasing your risk or improving upon your reward possibilities, which if left alone will slowly decay into maximum loss most of the time. This applies equally to long straddles, strangles, or backspreads or... whatever that is convex at the current price. If you go back to the initial pic I posted, point X is at an inflexion point (or tries to be). At that magic point, if price stays there till expiry, the position will not change in price. So you can say that at that point it is neither convex nor concave. Like a porcupine, whoever tries to f..k with it, he'll get stung!. Except for commissions and execution costs, of course.
Eudamon Yup! I am getting the picture. Long Straddles/straddles are for a volatility POP, or temporary ballooning. Sort of like somebody blowing a kids soap bubble into the air, and it floats on the breeze for a bit, but busts, or deflates unexpectedly. Maybe not much difference in the time limit. So that means anticipating some market volatility. I was watching GOOGLE over the weekend and a couple of SPY trades. The GOOG actually made some money, but looking at the chart it looked like selling straight PUTS might have been a better play? Seems to be a very volatile stock. I had read somewhere that INTC is a favorite also? GOOG made $156 net this morning from Friday in the STRADDLE. SPY cleared $10 net. Paper trading of course. ******* That backspead post of yours was with STRADDLES, or STRANGLES right? Just to clear up mind. That was the way I was trying to picture it in my mind. Forex Forex has me convinced to trade real money this week. Now I just have to pick my volatility candidates. I can only trade TWO trades in Straddles/strangles, as that would count as four trades in one week. Forgot to look up that rule on day trading again. Do it right now.
Why not papertrade for a few months, to learn the many quirks in these options positions, and at the same time save some cash so that you are not curtailed by the 25k restriction?. I'd do that. The money you are going to make or lose, either way, is not going to be big anyways.
Eudamon I´m thinking on it. I can do that of course. Did talk with HELP at TOS, but they were not helpful. So I have a query by email into CBOE for more info. If I trade two STRADDLES using TOS default prices, That is okay for two trades they tell me. But if I leg into a straddle to get better prices, then I violate the Day Trader rule. My straddle becomes not two trades, but four trades. As I read it, you are only allowed 3 trades per week.
Rarely a long premium, delta neutral position will provide profits untouched to expiration. When you put it on, is because you expect something to happen, i.e.: Price to move fast one way, or the other, or either, or volat to explode or implode. What will make or lose you money with this, or any other strategy, is your ability to put it on at an opportune time and to take profits/losses/close it/exit it when whatever happens occurs. Every minute, hour or day that passes, something new occurs, and you are already prepared to re-spond to it. Basically you want everything that you execute afterwards to improve upon your position, decreasing your risk or improving upon your reward possibilities, which if left alone will slowly decay into maximum loss most of the time. This applies equally to long straddles, strangles, or backspreads or... whatever that is convex at the current price. If you go back to the initial pic I posted, point X is at an inflexion point (or tries to be). At that magic point, if price stays there till expiry, the position will not change in price. So you can say that at that point it is neither convex nor concave. Like a porcupine, whoever tries to f..k with it, he'll get stung!. Except for commissions and execution costs, of course. _________________________________ Eudamon I had trouble understanding some of this. The words inflexion and convex and concave did not bring any visualization picture to my mind, from such option jargon. Could you clarify please? The initial pic you posted at X, I visualized as say in a bear trend, being someplace on the major down leg, and point 1 would be the peak of the pullback, a top lower than the top before, in a stepladder descent in a bear trend, and point 2 being the bottom of the main down leg of whichever wave is happening. Before the next pullback.
A long straddle is convex at every point. (the curvature is upwards). A short straddle is concave at every point. (the curvature is downwards). That pic I posted is convex from point X leftwards, and concave from point X rightwards. Therefore at exactly point X, the curvature is zero. It also crosses the expiring PNL graph near point X, which is an added benefit...if you think about it for a while. Sometimes a long while. Some people use convex/concave terms opposite. Matter of nomenclature.
Ha! I´m just an uneducated hick. Self taught character that works with his hands, normally. Except now I´m old and so forth. Whats a PNL graph? got the convex and concave, but what is the nonemclature in this reference. Was that the PNL graph in your jpg ?
http://en.wikipedia.org/wiki/Convex_function http://en.wikipedia.org/wiki/Concave_function http://en.wikipedia.org/wiki/Long_straddle#Long_straddle http://upload.wikimedia.org/wikipedia/commons/2/28/Put_backspread_increasing_volatility.png The last graph curves up on the left and curves down on the right. Call that convex/concave.
Interesting stuff this morning. 1) Overnight strangle lost - $102 2) Straight Call buying + 18 3) Eduamon method ahead + 58