Tuesday, April 6, 2010

report #20 OPTION SPREAD TRADING EXPERIENCES

CHIT CHAT WITH A TRADER FRIEND ON EXPERIENCES AND VIEW Report #20

Hi Doug;

I don't really like reading other peoples stuff on their market opinions, or stuff like that. It is a good way to lose money. The effect on your own analysis is usually bad. I think a trader has to stand on his own two feet. Sort of like the GIVE A MAN A FISH and you feed him for one meal idea. BUT TEACH A MAN TO FISH and you feed him for life.

That said; in looking up experiences and references to different option trading strategies I did run across an interesting site the other day called LIVE OPTIONS TRADING EVENT, by Peter Stolcer which was pretty good. It more or less mirrored my own conclusions, so I guess that is why I felt it was okay? ( grin! )

I have opened an account with THINKORSWIM brokerage ( paper money ) as they offer WEEKLIES expirations in the OEX and have one side of a BRACKETING, CHANNEL SPREAD ( iron condor) completed and will try to put the other side on today. For expiration on Friday, settlement Saturday. Their FREE ACCOUNT size is $100,000 so I feel quite wealthy. ( grin! ) I'm sticking with a $5000 limit for training purposes though. I'll probably use OPTION HOUSE for everything else, in straight buying, or single VERTICAL SPREADS.
Lost money last week on my quickie trade, so I don't have much going right now. The volume is so low. At least with WEEKLY EXPIRATION spreads I can have something to do and pass the time.
http://oexoptiontradingexperience.blogspot.com

I think if you do the channel credit spreads, with safety in mind and pyramid every two months, you could get some serious annual profit returns over 150%? Anyway, working on it and studying it. Trying it. Mostly I'm interested to see what happens in a rapid BEAR MARKET and if I could get out of the losing side of the BULL IRON CONDOR in reality, without too big a loss, during a rapid plunge. That seems to be the only danger to credit spread trading? The skew for losses is very bad. Trend following and CREDIT SPREADS seem to be the best choices so far tried.
The QUICKIE TRADES do not seem to be working out? My longer very few ( 6 or 8 ) trend following trades are pretty much settled and do work. So I'm very pleased with that aspect. Now over the rest of this year, to see if I do okay? The trends tend to follow the monthly bar chart over each two month period. I think the QUICKIE trades with any reliability will only work in a BEAR PLUNGE.
So my trading philosphy is crystalizing and getting sorted out. Going to study DEBIT SPREADS after I get through with these CREDIT SPREADS. Got me a 4 page work sheet on CREDIT SPREAD TRADING do's and don'ts. Culled from all over the web chat forums. Set myself up some rules to follow. The SECRETS and TRICKS which one can find if one reads enough and tries some things yourself.
About 20 years ago, I read about 5 books on SPREAD TRADING by an old trader in the Florida International University library. It was really exciting reading, as he went blow by blow on each trade, as he juggled the market conditions. At the time I thought I want to do that. The sources on market data is a lot more today and it becomes easier to understand what he was doing back then. There is a lot more information on how these things work in real life now through the internet. Back then I found it mystifying and lost some money trying it through a discount broker. ( who was still very expensive ) Sort of like guys saying you have to use real money, to play poker. In the army I lost my first $5 trying to learn poker and gave it up. Didn't make any sense to me, that modus operandi.

--- On Mon, 4/5/10, Doug Morris wrote:

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