OPTION HOUSE FOR MONTHLY SPREAD TRADES ( Report # 30 )
Starting balance: hypothetical $20,000, paper trading virtual platform. ( started roughly middle first half of month ? )
MAY - 2010 OPTION HOUSE BROKERAGE
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Trade 1 :May 4th, 2010 ( MONTHLY trade May) OPTION HOUSE BROKERAGE
10 contracts - Sell OEX 560/Buy 565 strikes @ .30 cents spread
Order I.D. 251 49211
+$300 credit, expenses $22.50 (commission + fee )
SPREAD IS WORKING TOWARD EXPIRATION ON MAY 22ND. Basically the bet is that the trend is down, for next two weeks or so.
-- WIN--
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Trade # 1 for THINKORSWIM WEEKLY THURSDAY TRADE
10 oex 540/545 CALLS @ .20 cents limit order FILLED
+$200 - $40 commissions
Net profit: $ 160---- WIN -----
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MONTHLY TRADE FOR OPTION HOUSE
Trade 2
SELL 10 oex 550 Calls, Buy 10 OEX 555 Calls for spread of .30 cents.
( credit $300 - $22.50 commissions and fees )
---WIN --- Expires Dec. 22nd.
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**** I just noticed that ThinkorSwim costs per trade are double that of Option House! In the above case; Option House does not offer WEEKLY EXPIRATIONS, so there is no choice. Unless it is the 4 th weekly, which overlaps the last week of option period ( 3rd Friday ending of Month )
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Trade 3 Weekly - Option House ( LAST WEEK OF OPTION TRADING MONTH( expiration is third Friday of May ) Monday first hour trade.
seel 12 535 Calls/Buy 540 Calls @ limit order .25 cents + $300 - $24.50 costs
= +$275.50 --- WIN ---
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Trade 2 for thinkorswim brokerage Monday a.m. trade.
WEEKLY sell 10 535/540 CALLS Limit order was for .25 cents, but they executed at a .30 cents spread. $300 - $70 costs = +$280
--- WIN --- _________________________________
Trade 1 Experimental PUT - Paper Trading straight 1 PUT BUY August 520, @$30,80
Trying to see what 10 OEX points would bring, on a safer 3 month out option. You need more index point moves to get dollar moves, for less TIME DECAY trade off.
+$370 WIN ( OEX moved 10 points on a 1 PUT August $3080 trade for a gain of + $370 Net after commissions.WIN
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Friday, April 30, 2010
Monday, April 26, 2010
RE-FOCUSING ON DIRECTION OF TRADING STRATEGIES ( report # 29)
Report # 29
RE-FOCUSING ON CORE STRATEGIES
I'm eliminating all other trading right now and concentrating on Credit Spreads. Am also concentrating on only one BROKER, which is THINKORSWIM, as they give the detail and capability needed for trading both MONTHLY AND WEEKLY SPREADS.
a) Option House account has been raised to $20,000 for monthly spread trading, except possibly for a position directional trade in sure thing type trend starts, when the volatility is high. Though for a LOSS FREE trading system, money earner, I think I'm going to have to eliminate the taking of any position directional trades?
b) Position trading, based on market direction guessing has been terminated with my THINKORSWIM account, since that loss last week on a directional trade. There were too many losses. It works, but the results were not consistant enough. One position directional trade loss can wipe out all the accumulation of months of small steady incremental profits from spread trading, small as they are. It is more important in my mind, not to EVER have a losing trade.
My goal is as far as possible a LOSS FREE trading system. I realize this is not totally possible, but as close to it as I can get, is the goal.
For this reason, I'm concentrating on Vertical Credit Spreads, IRON Condors and IRON Butterflys. I have not even started to try, or study Butterflys yet. These three systems are CREDIT SPREAD strategy systems.
TRADES OPEN April 26th.THINKORSWIM BROKERAGE
MONTHLY Expiring third Friday in May/ 2010
1) Vertical Call Bear Spread 5 OEX 565/570 Calls @ .50 cents + $225 --results pending - trade working
2) Vertical Call Bear Spread 5 OEX 570/575 Calls @ .55 cents+ $250 --- results pending - trade working
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WEEKLY EXPIRATION April 26 - 30th/2010
1) Vertical Call Bear Spread 5 OEX 560 Call/ 565 @ .45 cents + $200 --- WIN
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2) WEEKLY TRADE - THINKORSWIM This trade was made on Wednesday morning. I attempted to put a limit order, at .10 cents, but got a FILL at .05 cents. I don't know why?
(2) Vertical Call Bear Spread 20 OEX 550/555 Calls at .05 cents Wednesday trade expiring on Friday evening. At only a (+ $100) I''m not sure what the brokerage fees and commissions will do to this? The 5 cents is too little.-- WIN! ---
Net profit: $100 - $70 commission = $30.
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I do have plans to POSITION TRADE, but only when a NEW TREND starts, at the point of highest VOLATILITY. When the meat is in the trend position trading, in the first third of the trend BEFORE volatility drops off and it no longer is practical. There are only 6 to 8 trends a year, so there are not many high quality trades otherwise, that more or less guarantee winning. That's the theory anyway. We shall see how it works out in practice.
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FOR VERTICAL CREDIT SPREAD RESULTS SEE REPORT #25
I'm studying on how much margin would be required to do a steady set of staggered, or overlapping Vertical Credit Spreads. One 5 contract Vertical Credit Spread requires $2500 in margin. So it looks like in one month, I might like to do up to 8 Vertical Credit Spreads. That would mean an account size of $20,000. If I can get a local faster internet service provider. In the meantime, will continue the practice and learning process using ThinkorSwim funny paper money account for another 6 weeks or so.
RE-FOCUSING ON CORE STRATEGIES
I'm eliminating all other trading right now and concentrating on Credit Spreads. Am also concentrating on only one BROKER, which is THINKORSWIM, as they give the detail and capability needed for trading both MONTHLY AND WEEKLY SPREADS.
a) Option House account has been raised to $20,000 for monthly spread trading, except possibly for a position directional trade in sure thing type trend starts, when the volatility is high. Though for a LOSS FREE trading system, money earner, I think I'm going to have to eliminate the taking of any position directional trades?
b) Position trading, based on market direction guessing has been terminated with my THINKORSWIM account, since that loss last week on a directional trade. There were too many losses. It works, but the results were not consistant enough. One position directional trade loss can wipe out all the accumulation of months of small steady incremental profits from spread trading, small as they are. It is more important in my mind, not to EVER have a losing trade.
My goal is as far as possible a LOSS FREE trading system. I realize this is not totally possible, but as close to it as I can get, is the goal.
For this reason, I'm concentrating on Vertical Credit Spreads, IRON Condors and IRON Butterflys. I have not even started to try, or study Butterflys yet. These three systems are CREDIT SPREAD strategy systems.
TRADES OPEN April 26th.THINKORSWIM BROKERAGE
MONTHLY Expiring third Friday in May/ 2010
1) Vertical Call Bear Spread 5 OEX 565/570 Calls @ .50 cents + $225 --results pending - trade working
2) Vertical Call Bear Spread 5 OEX 570/575 Calls @ .55 cents+ $250 --- results pending - trade working
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WEEKLY EXPIRATION April 26 - 30th/2010
1) Vertical Call Bear Spread 5 OEX 560 Call/ 565 @ .45 cents + $200 --- WIN
___________________________________
2) WEEKLY TRADE - THINKORSWIM This trade was made on Wednesday morning. I attempted to put a limit order, at .10 cents, but got a FILL at .05 cents. I don't know why?
(2) Vertical Call Bear Spread 20 OEX 550/555 Calls at .05 cents Wednesday trade expiring on Friday evening. At only a (+ $100) I''m not sure what the brokerage fees and commissions will do to this? The 5 cents is too little.-- WIN! ---
Net profit: $100 - $70 commission = $30.
_________________________________________
I do have plans to POSITION TRADE, but only when a NEW TREND starts, at the point of highest VOLATILITY. When the meat is in the trend position trading, in the first third of the trend BEFORE volatility drops off and it no longer is practical. There are only 6 to 8 trends a year, so there are not many high quality trades otherwise, that more or less guarantee winning. That's the theory anyway. We shall see how it works out in practice.
____________________________________________
FOR VERTICAL CREDIT SPREAD RESULTS SEE REPORT #25
I'm studying on how much margin would be required to do a steady set of staggered, or overlapping Vertical Credit Spreads. One 5 contract Vertical Credit Spread requires $2500 in margin. So it looks like in one month, I might like to do up to 8 Vertical Credit Spreads. That would mean an account size of $20,000. If I can get a local faster internet service provider. In the meantime, will continue the practice and learning process using ThinkorSwim funny paper money account for another 6 weeks or so.
Wednesday, April 21, 2010
Report #28 Difference between CONDORS and IRON CONDORS
Some profit numbers for SPREADS (Report #28)
1 Condor Spread - 2 Iron Condor Spread - 3 Butterfly Spread - 4)Iron Butterfly Spread
Debit/Credit: 1 Debit - 2 Credit - 3 Debit - 4 Credit
Max Profit: - Low - High - Higher - Highest
Max Loss: - Highest - Higher - High - Low
Cost of Position: - High - NIL - Low - NIL
Profitable Range: - Wide - Widest - Narrow - Wider
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I have learned the difference between the CONDOR SPREAD and the IRON CONDOR. Something I did not know? The CONDOR spread is either the upper and lower channels only in CALLS, or in PUTS. Whereas the IRON CONDOR SPREAD is the playing of; out-the-money, on the bottom of a channel, as in PUTS for a BULL move, or as in CALLS out-the-money, in a BEAR move at the top of a channel. In other words the VERTICAL BULL PUT Spread is on the bottom of the channel and the VERTICAL BEAR CALL SPREAD is on the top of the channel. Since so far, I always leg in, I hadn't made that realization. Yet I see in THINKORSWIM, they list the CONDOR a debit Spread channel, as different, to the IRON CONDOR a credit spread channel.
I had not realized this difference. In fact, I had not even considered the CONDOR as something separate, much less a DEBIT SPREAD TYPE CHANNEL.
So an amateur learns! Guess what I want are IRON CONDORS which are credit spreads and will remember that in future.
Perhaps in the not too distant future I will study the IRON BUTTERFLY? Sounds interesting? It does sound like the IRON CONDOR and the IRON BUTTERFLY seem the best spread strategies? These are credit strategies.
1 Condor Spread - 2 Iron Condor Spread - 3 Butterfly Spread - 4)Iron Butterfly Spread
Debit/Credit: 1 Debit - 2 Credit - 3 Debit - 4 Credit
Max Profit: - Low - High - Higher - Highest
Max Loss: - Highest - Higher - High - Low
Cost of Position: - High - NIL - Low - NIL
Profitable Range: - Wide - Widest - Narrow - Wider
_______________________________________________
I have learned the difference between the CONDOR SPREAD and the IRON CONDOR. Something I did not know? The CONDOR spread is either the upper and lower channels only in CALLS, or in PUTS. Whereas the IRON CONDOR SPREAD is the playing of; out-the-money, on the bottom of a channel, as in PUTS for a BULL move, or as in CALLS out-the-money, in a BEAR move at the top of a channel. In other words the VERTICAL BULL PUT Spread is on the bottom of the channel and the VERTICAL BEAR CALL SPREAD is on the top of the channel. Since so far, I always leg in, I hadn't made that realization. Yet I see in THINKORSWIM, they list the CONDOR a debit Spread channel, as different, to the IRON CONDOR a credit spread channel.
I had not realized this difference. In fact, I had not even considered the CONDOR as something separate, much less a DEBIT SPREAD TYPE CHANNEL.
So an amateur learns! Guess what I want are IRON CONDORS which are credit spreads and will remember that in future.
Perhaps in the not too distant future I will study the IRON BUTTERFLY? Sounds interesting? It does sound like the IRON CONDOR and the IRON BUTTERFLY seem the best spread strategies? These are credit strategies.
THE NUANCES OF VERTICAL CREDIT SPREADS ( ( report # 27 )
The NUANCES of CREDIT SPREAD VERTICALS Report #27
In studying the Vertical Credit Spread, there are some misleading stuff out there. It only takes ONE TRADE in which the market sweeps through your CREDIT SPREAD to maximum destruction, to wipe out the small accumulation of profits you gained for the whole year. In 2008 a lot of CREDIT SPREAD TRADERS got wiped out. COMPLETELY! They of course were pyramiding. They had to start back again from rock bottom. The 90% winners garbage quoted for CREDIT SPREADS is very misleading.
The best advice I read was a guy who said he closed his CREDIT SPREAD when he had gained 80% of the TIME DECAY and swallowed the cost of paying the extra commissions. I've tried this in practice. It works out, but the CREDIT SPREAD is a low earner at the best of times, versus the money you have in margin at risk. Closing out when you have only 80% of the value earned is not I feel the right answer.
On the other hand, I've experimented ( paper trading and virtual account trading ) and there are some rules you can apply. A bull market goes up more slowly than a BEAR down market. If you are going to be threatened, it is most likely a rapid DOWNWARD BEAR MARKET drop will wipe you out. You will not have the time to place the order, or get it executed, Particularly in short term weekly trading expirations. Maybe in Longer monthly expirations? Mostly the problem is GREED and the tendency to keep pyramiding profits. You should be taking money off the table, or out of the account regularly. Say every quarter?
In a BULL MARKET you can start entering your order, about 2 OEX points before your SOLD side is touched by the market action. In a BEAR MARKET plunge, you should be closing out your SPREAD at least 6 points away from your SOLD side being touched. Better to end up with nothing, or a minor plus couple of dollars than lose everything?
Narrow channels and weeklies are most dangerous. You don't have enough time! A Friday expiration that coincides with news reports can drop right out from under you and in such short term trading, will sweep through your bet so fast, all your profits for the year will be gone.
- Just something to think about! -
In studying the Vertical Credit Spread, there are some misleading stuff out there. It only takes ONE TRADE in which the market sweeps through your CREDIT SPREAD to maximum destruction, to wipe out the small accumulation of profits you gained for the whole year. In 2008 a lot of CREDIT SPREAD TRADERS got wiped out. COMPLETELY! They of course were pyramiding. They had to start back again from rock bottom. The 90% winners garbage quoted for CREDIT SPREADS is very misleading.
The best advice I read was a guy who said he closed his CREDIT SPREAD when he had gained 80% of the TIME DECAY and swallowed the cost of paying the extra commissions. I've tried this in practice. It works out, but the CREDIT SPREAD is a low earner at the best of times, versus the money you have in margin at risk. Closing out when you have only 80% of the value earned is not I feel the right answer.
On the other hand, I've experimented ( paper trading and virtual account trading ) and there are some rules you can apply. A bull market goes up more slowly than a BEAR down market. If you are going to be threatened, it is most likely a rapid DOWNWARD BEAR MARKET drop will wipe you out. You will not have the time to place the order, or get it executed, Particularly in short term weekly trading expirations. Maybe in Longer monthly expirations? Mostly the problem is GREED and the tendency to keep pyramiding profits. You should be taking money off the table, or out of the account regularly. Say every quarter?
In a BULL MARKET you can start entering your order, about 2 OEX points before your SOLD side is touched by the market action. In a BEAR MARKET plunge, you should be closing out your SPREAD at least 6 points away from your SOLD side being touched. Better to end up with nothing, or a minor plus couple of dollars than lose everything?
Narrow channels and weeklies are most dangerous. You don't have enough time! A Friday expiration that coincides with news reports can drop right out from under you and in such short term trading, will sweep through your bet so fast, all your profits for the year will be gone.
- Just something to think about! -
THINKORSWIM beats out OPTION HOUSE ! ( report #26 )
THINKORSWIM BEATS OUT OPTION HOUSE IN EXPERIMENTAL TRIALS Report #26
We've had a month or more to diddle with both Option House and ThinkorSwim brokerage online web platforms. In the process have decided to go with THINKORSWIM. They cost a little more in commissions, but the data and detail and complexity of their software is outstanding. Also the deciding criteria was that I was going through eliminating any LOSING TRADE IDEAS. This is narrowing down through trial and error, to SPREAD TRADING. One of the most successful trading ideas was the VERTICAL SPREAD and since this is a non directional trade, within parameters, channels or brackets, works fairly well. Took some learning though, and I'm not sure I've figured out all the nuances yet. The WEEKLY EXPIRATIONS in the OEX were the deciding factor for me. OPTION HOUSE do not offer them. THINKORSWIM do.
I had another problem with OPTION HOUSE, tried to do a long put the other day and it said my account was worth $3200 but refused my trade, saying I was only allowed option trades up to $547. The point in learning I was at, I just gave up, not wanting to fight with it anymore. I did not understand their figuring.
On the other hand, THINKORSWIM do not have good customer service. They are overloaded with cash traders, and do not have the time, to deal with the paper trading learners. So trying to figure out the complexity of their software - web based package is confusing and slow for me. Been at it around two weeks now. Picking up tricks as I go along, but a slow process. Still, they are giving me the trading information I need to make a decision on when to go into CASH TRADING with my life savings. Looks like about 6 to 8 weeks away, if I stay successful?
There is still a lot to learn for me. I've decided to drop all directional LONG trades, or singles and concentrate on non-directional SPREAD TRADING. I've actually only learned roughly one method so far, the VERTICAL SPREAD, or at least half of this method.
They also have DEBIT VERTICALS, CREDIT VERTICALS, SINGLES, BACK RATIO, CALENDAR, DIAGONAL, STRADDLE, STRANGLE, BUTTERFLY, CONDOR, IRON CONDOR, VERTICAL ROLL.
Right now I'm having trouble EXITING, or CLOSING the VERTICAL SPREAD on their web based platform, but did successfully close a long single PUT yesterday, entering the opposing trade. So I'm guessing it will be more or less the same for the SPREADS?
We've had a month or more to diddle with both Option House and ThinkorSwim brokerage online web platforms. In the process have decided to go with THINKORSWIM. They cost a little more in commissions, but the data and detail and complexity of their software is outstanding. Also the deciding criteria was that I was going through eliminating any LOSING TRADE IDEAS. This is narrowing down through trial and error, to SPREAD TRADING. One of the most successful trading ideas was the VERTICAL SPREAD and since this is a non directional trade, within parameters, channels or brackets, works fairly well. Took some learning though, and I'm not sure I've figured out all the nuances yet. The WEEKLY EXPIRATIONS in the OEX were the deciding factor for me. OPTION HOUSE do not offer them. THINKORSWIM do.
I had another problem with OPTION HOUSE, tried to do a long put the other day and it said my account was worth $3200 but refused my trade, saying I was only allowed option trades up to $547. The point in learning I was at, I just gave up, not wanting to fight with it anymore. I did not understand their figuring.
On the other hand, THINKORSWIM do not have good customer service. They are overloaded with cash traders, and do not have the time, to deal with the paper trading learners. So trying to figure out the complexity of their software - web based package is confusing and slow for me. Been at it around two weeks now. Picking up tricks as I go along, but a slow process. Still, they are giving me the trading information I need to make a decision on when to go into CASH TRADING with my life savings. Looks like about 6 to 8 weeks away, if I stay successful?
There is still a lot to learn for me. I've decided to drop all directional LONG trades, or singles and concentrate on non-directional SPREAD TRADING. I've actually only learned roughly one method so far, the VERTICAL SPREAD, or at least half of this method.
They also have DEBIT VERTICALS, CREDIT VERTICALS, SINGLES, BACK RATIO, CALENDAR, DIAGONAL, STRADDLE, STRANGLE, BUTTERFLY, CONDOR, IRON CONDOR, VERTICAL ROLL.
Right now I'm having trouble EXITING, or CLOSING the VERTICAL SPREAD on their web based platform, but did successfully close a long single PUT yesterday, entering the opposing trade. So I'm guessing it will be more or less the same for the SPREADS?
Friday, April 16, 2010
Trade results of spreads, April 12th to 16th, 2010 ( Report # 25 )
Report #25, end of monthly expiration week of April 16th. The BEAR MARKET or CHANGE OF TREND occurred.
Summary: Made five Vertical Spread Trades and one Iron Condor channel trade. All were winning trades!
I did one vertical with thinkorswim brokerage and this was more to test the ability to CLOSE out a Spread Trade. They were overwhelmed and unable to advise me, and I couldn't figure it out, so had them close the spread trade early for me.
5 Vertical PUTS 535/530 for a credit of +$150
The early closing cost me .10 cents, so end result was =$100
Two commissions were - $50. Net profit + $50 -- WIN
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Option House brokerage trade
5 sell 534/530 for .30 cents which was +$150
Less one commission of $25 ( went to expiration ) = $150 - $25 = $125 net profit --- WIN
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PAPER TRADING independently
5 April Puts 530/525 for .30 cents = +$150
Less commission of one due to going to expiration: $150 - $25 = + $125 net profit --- WIN
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Vertical CALL BEAR SPREAD on THURSDAY noon, 5 sell April Call 560/565 for +$125
Less -$25 commission = + $100 --- WIN
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Vertical Put BULL spread on THURSDAY noon, before next day expiration.
5 April Puts 535/530 for $150 ( went to expiration )
Less $25 commission = +$125 -- WIN
________________________________________
IRON CONDOR TRADE ( bracketing channel ) Done on noon Thursday, day before Expiration Friday.
20 sell April PUTS 545/540 for .10 cents or + $200
This side of the Condor got threatened and had to be close early. We actually closed it 3 index points away and received .10 cents, so broke even on the cash, but lost $50 for the two commissions. Trade loss - $50
The other side of the Condor made money though and covered the loss.
20 sell April CALLS 560/565 or .20 cents x 2000 = + $400
Less commissions - $50 = $400 - $50 = $300. After deducting losing side of the IRON CONDOR we had a net profit for the CONDOR channel of + $300 --- WIN
**** This week was all CREDIT SPREADS using weeklies! The TREND changed on Friday and we will be going to a different strategy. Probably LONG PUTS and a shift to VIRTUAL BROKERAGE TRADING as we gain more confidence in our decision making.
+++++++++++++++++++++++++++++++++++++++++++++++
BALANCES IN DIFFERENT STRATEGIES TRIED UP UNTIL APRIL 16TH, 2010.
Virtual Account: OPTION HOUSE-
Option House balance: $3109 + $125 = $3234 (- 35% ) Made a slight gain to getting out of the hole here.
Paper trading in Quickie Trading: +6%(reduced from 12% to +6%) I'm planning to stop quickie trades. They lose too often.
Credit Spread singles: ( paper trading ) +10% last week. This week + 20% New Balance: $6025
I did five Vertical Spread trades. One on Option House brokerage for + $125 and one on sinkorswim brokerage. Haven't figure out how to close out trades in Sinkorswim brokerage yet and that will be the lesson for the coming week. Anyway, closed early, because of the panic with the help of the broker and cleared + $50.
All told for the FIVE Vertical Spreads I made + $525. In normal trading I would not have the capital beginning like this, to have the reserve margin, to put on so many trades at the same time. So the result is distorted.
Channel credit spreads called CONDORS (paper trading) + 18% Previous Balance was $5600 and new balance at end of this week is: $5,900. Because of the Sinkorswim large account, I was able to put the IRON CONDOR with 20 contracts, and the results reflected that improved earnings. Starting out with a $5000 account that would not be possible, only 5 contracts would have been possible and probably not worthwhile. I have mixed feelings about IRON CONDORS. Sort of thing to do, if the opportunity arises, but otherwise forget it, is my feeling. Anyway Condor trading is now + 18%, at $5900, but I'm probably going to drop doing them, except rarely.
Debit Spreads ( haven't started studying them yet ) (I'm also interested in eventually studying ratio spreads, diagonals and horizontals, and butterflies sometime. Got too much on my plate right now, trying to learn and absorb this stuff above.)
VIRTUAL ACCOUNT WITH "thinkorswim" brokerage VIRTUAL BULL CREDIT PUT SPREADS + 3.5 % WEEKLY EXPIRATION. I'm leaning toward concentrating on less risky, lower profit steady income flow from Vertical Spreads. Will know more after running this BEAR MARKET just started using some mix of Vertical spreads and long PUTS.
Trend longer trading (6 or 8 per yr)( hasn't started yet )zero neutral
Summary: Made five Vertical Spread Trades and one Iron Condor channel trade. All were winning trades!
I did one vertical with thinkorswim brokerage and this was more to test the ability to CLOSE out a Spread Trade. They were overwhelmed and unable to advise me, and I couldn't figure it out, so had them close the spread trade early for me.
5 Vertical PUTS 535/530 for a credit of +$150
The early closing cost me .10 cents, so end result was =$100
Two commissions were - $50. Net profit + $50 -- WIN
______________________________________
Option House brokerage trade
5 sell 534/530 for .30 cents which was +$150
Less one commission of $25 ( went to expiration ) = $150 - $25 = $125 net profit --- WIN
______________________________________
PAPER TRADING independently
5 April Puts 530/525 for .30 cents = +$150
Less commission of one due to going to expiration: $150 - $25 = + $125 net profit --- WIN
______________________________________________
Vertical CALL BEAR SPREAD on THURSDAY noon, 5 sell April Call 560/565 for +$125
Less -$25 commission = + $100 --- WIN
___________________________________
Vertical Put BULL spread on THURSDAY noon, before next day expiration.
5 April Puts 535/530 for $150 ( went to expiration )
Less $25 commission = +$125 -- WIN
________________________________________
IRON CONDOR TRADE ( bracketing channel ) Done on noon Thursday, day before Expiration Friday.
20 sell April PUTS 545/540 for .10 cents or + $200
This side of the Condor got threatened and had to be close early. We actually closed it 3 index points away and received .10 cents, so broke even on the cash, but lost $50 for the two commissions. Trade loss - $50
The other side of the Condor made money though and covered the loss.
20 sell April CALLS 560/565 or .20 cents x 2000 = + $400
Less commissions - $50 = $400 - $50 = $300. After deducting losing side of the IRON CONDOR we had a net profit for the CONDOR channel of + $300 --- WIN
**** This week was all CREDIT SPREADS using weeklies! The TREND changed on Friday and we will be going to a different strategy. Probably LONG PUTS and a shift to VIRTUAL BROKERAGE TRADING as we gain more confidence in our decision making.
+++++++++++++++++++++++++++++++++++++++++++++++
BALANCES IN DIFFERENT STRATEGIES TRIED UP UNTIL APRIL 16TH, 2010.
Virtual Account: OPTION HOUSE-
Option House balance: $3109 + $125 = $3234 (- 35% ) Made a slight gain to getting out of the hole here.
Paper trading in Quickie Trading: +6%(reduced from 12% to +6%) I'm planning to stop quickie trades. They lose too often.
Credit Spread singles: ( paper trading ) +10% last week. This week + 20% New Balance: $6025
I did five Vertical Spread trades. One on Option House brokerage for + $125 and one on sinkorswim brokerage. Haven't figure out how to close out trades in Sinkorswim brokerage yet and that will be the lesson for the coming week. Anyway, closed early, because of the panic with the help of the broker and cleared + $50.
All told for the FIVE Vertical Spreads I made + $525. In normal trading I would not have the capital beginning like this, to have the reserve margin, to put on so many trades at the same time. So the result is distorted.
Channel credit spreads called CONDORS (paper trading) + 18% Previous Balance was $5600 and new balance at end of this week is: $5,900. Because of the Sinkorswim large account, I was able to put the IRON CONDOR with 20 contracts, and the results reflected that improved earnings. Starting out with a $5000 account that would not be possible, only 5 contracts would have been possible and probably not worthwhile. I have mixed feelings about IRON CONDORS. Sort of thing to do, if the opportunity arises, but otherwise forget it, is my feeling. Anyway Condor trading is now + 18%, at $5900, but I'm probably going to drop doing them, except rarely.
Debit Spreads ( haven't started studying them yet ) (I'm also interested in eventually studying ratio spreads, diagonals and horizontals, and butterflies sometime. Got too much on my plate right now, trying to learn and absorb this stuff above.)
VIRTUAL ACCOUNT WITH "thinkorswim" brokerage VIRTUAL BULL CREDIT PUT SPREADS + 3.5 % WEEKLY EXPIRATION. I'm leaning toward concentrating on less risky, lower profit steady income flow from Vertical Spreads. Will know more after running this BEAR MARKET just started using some mix of Vertical spreads and long PUTS.
Trend longer trading (6 or 8 per yr)( hasn't started yet )zero neutral
Thursday, April 15, 2010
Report # 24 SHAKING THE MONEY TREE!
SHAKING THE MONEY TREE - DAY TRADING!
Well it's 3:32 p.m. and I'm finally back at my computer. The sky is blue, low puffy white clouds and the atmosphere is clear after a morning shower of short duration. You can see the cloud shadows moving across the green of the Yalbac Hills some 8 miles away across the Belize River Valley. Very pretty picture to the eye.
Back to puzzling what the big guys are doing in Spread Trading? I trade small, right now as a beginner, only 5 contracts and my margin required is $2500 a trade. Yesterday I found out that my margin requirements are $500 for each point apart between strike prices, times the number of contracts. I hope to get up to 20 contracts sometime this year, if not too far away. That would be $10,000 margin for each trade. Currently in my beginning trials I am buying Spreads that run between .20 cents and .30 cents. Sometimes .25 cents. A spread is where you sell some contracts and buy some contracts at a different price.
There are guys on the brokerage that are trading 300 or 400 or 500 contracts at a time. Which would require you to put up and lock in $150,000 cash margin for the duration of the trade. I'm new at this and trying to figure out the relationships of what happens, in the WHAT IF scenarios.
I look at the quote machine and I am wondering what are they doing? Spreads normally run through until EXPIRATION. There are two kinds of markets, European style, which you must hold until expiration and American style, which you can close out anytime. From what I can surmise from watching the bid - ask quote board, the big guys are at least some of them trading for .5 cents. Meaning that if the market moves a point in either direction, the spread might widen by .05 cents and you close it out. There are 100 options in a contract, so if you are trading 300 contracts and you manage to buy a spread at say .20 cents and sell it at .25 cents,- you gain .05 cents. Times this by 300 x 100 = 30,000 times .05 cents. ( I'm thinking with my fingertips here! ) which should net you $1500 and you can do this in an hour, if you pick a time when there is market volatility. Hmmmmn! I'm not sure of the brokerage fees on 300 contracts, but on 5 contracts, it comes to $50 for opening and closing, or $25 each. Will go check on the fees and see how that works? I haven't found anything in the literature on spread trading on the web that explains this short term strategy. So maybe there is something wrong with my thinking? On 5 contracts that would not be worthwhile I think. Let's see? $2500 margin, .05 cents x 500 = $25. No! that wouldn't work small scale. Let's see 20 contracts .05 cents x 2000 = $100. Less the $50 cost of entering and closing the spread, leaving you with $50. So 20 contracts is workable. Have to think about that for a bit.
The bigger the bet of course, the more the profit!
Well it's 3:32 p.m. and I'm finally back at my computer. The sky is blue, low puffy white clouds and the atmosphere is clear after a morning shower of short duration. You can see the cloud shadows moving across the green of the Yalbac Hills some 8 miles away across the Belize River Valley. Very pretty picture to the eye.
Back to puzzling what the big guys are doing in Spread Trading? I trade small, right now as a beginner, only 5 contracts and my margin required is $2500 a trade. Yesterday I found out that my margin requirements are $500 for each point apart between strike prices, times the number of contracts. I hope to get up to 20 contracts sometime this year, if not too far away. That would be $10,000 margin for each trade. Currently in my beginning trials I am buying Spreads that run between .20 cents and .30 cents. Sometimes .25 cents. A spread is where you sell some contracts and buy some contracts at a different price.
There are guys on the brokerage that are trading 300 or 400 or 500 contracts at a time. Which would require you to put up and lock in $150,000 cash margin for the duration of the trade. I'm new at this and trying to figure out the relationships of what happens, in the WHAT IF scenarios.
I look at the quote machine and I am wondering what are they doing? Spreads normally run through until EXPIRATION. There are two kinds of markets, European style, which you must hold until expiration and American style, which you can close out anytime. From what I can surmise from watching the bid - ask quote board, the big guys are at least some of them trading for .5 cents. Meaning that if the market moves a point in either direction, the spread might widen by .05 cents and you close it out. There are 100 options in a contract, so if you are trading 300 contracts and you manage to buy a spread at say .20 cents and sell it at .25 cents,- you gain .05 cents. Times this by 300 x 100 = 30,000 times .05 cents. ( I'm thinking with my fingertips here! ) which should net you $1500 and you can do this in an hour, if you pick a time when there is market volatility. Hmmmmn! I'm not sure of the brokerage fees on 300 contracts, but on 5 contracts, it comes to $50 for opening and closing, or $25 each. Will go check on the fees and see how that works? I haven't found anything in the literature on spread trading on the web that explains this short term strategy. So maybe there is something wrong with my thinking? On 5 contracts that would not be worthwhile I think. Let's see? $2500 margin, .05 cents x 500 = $25. No! that wouldn't work small scale. Let's see 20 contracts .05 cents x 2000 = $100. Less the $50 cost of entering and closing the spread, leaving you with $50. So 20 contracts is workable. Have to think about that for a bit.
The bigger the bet of course, the more the profit!
Wednesday, April 14, 2010
Report #23 Figuring Vertical Spread margin.
The learning experience continues!
I was puzzling out what the margin requirements are for credit spreads. I got really confused over it. Pete Stolcer a famous option guru with several websites on option trading, I occasionally check for reference and teaching, one of his sites. 1option.com
Anyway he responded to my query and with my subconcious over a couple of nights of calculating the thing, finally realized that my margin formula was:
$500 for a spaced one strike spread of five points x number of contracts I wish to trade. You can get a little picky here and subtract the CREDIT you receive from selling the TIME DECAY, which does not reduce it much. So for a 5 contract spread you need $2500 margin, less any miniscule credit you received, to be paid for by the TIME DECAY as the Spread runs out daily to EXPIRATION.
The way I'm trading is going out for SAFETY, which means I'm gambling $2500 margin against a profit credit of 2.5 % of that, should I do right. Huge potential loss, versus the profit. However, it is offset by the safety factor, if you figure it right. The only real threat I can see, is if the market makes a sudden BEAR PLUNGE very rapidly in one day and I cannot close out my spread quick enough, to catch it running through my bet. Haven't learned how to close out yet. That experience will come eventually I suppose? Which is why we do virtual paper trading first.
That's the new lesson for this week so far!
________________________________________
If you leg in with another Vertical Spread forming a price channel, above and below, currently called an IRON CONDOR, the margin stays the same, as you only have to put margin on one side of the channel. Because only one side can get hit, if price action is volatile enough, or you put it in too close to the movement. I'm told that this usually wipes out both sides of the channel profit. The goal is to swallow an extra set of commissions and close out BEFORE you get hit, should the price go against you. That way if you had collected enough TIME DECAY already, you might even break even, or perhaps take a little cash home with you. It is very little, if you are lucky about +$15. Which is better than losing $300 by letting your threatened STRIKE PRICE get hit. Or even worse, by the price action going through your spread and consuming your margin at $500 a point. ( $2500 loss potential ) At least in a 5 contract spread, which I'm currently trading. The losses get bigger if you are hit, multiplied by the number of contracts you hold.
Some recommend closing out when you have 80% of the TIME DECAY, if you are close to the last day before EXPIRATION. Others say, you can do a ROLL OVER which means implementing ANOTHER Vertical Spread, another strike further away. Not faced those decisions or problems YET!
________________________________
I was puzzling out what the margin requirements are for credit spreads. I got really confused over it. Pete Stolcer a famous option guru with several websites on option trading, I occasionally check for reference and teaching, one of his sites. 1option.com
Anyway he responded to my query and with my subconcious over a couple of nights of calculating the thing, finally realized that my margin formula was:
$500 for a spaced one strike spread of five points x number of contracts I wish to trade. You can get a little picky here and subtract the CREDIT you receive from selling the TIME DECAY, which does not reduce it much. So for a 5 contract spread you need $2500 margin, less any miniscule credit you received, to be paid for by the TIME DECAY as the Spread runs out daily to EXPIRATION.
The way I'm trading is going out for SAFETY, which means I'm gambling $2500 margin against a profit credit of 2.5 % of that, should I do right. Huge potential loss, versus the profit. However, it is offset by the safety factor, if you figure it right. The only real threat I can see, is if the market makes a sudden BEAR PLUNGE very rapidly in one day and I cannot close out my spread quick enough, to catch it running through my bet. Haven't learned how to close out yet. That experience will come eventually I suppose? Which is why we do virtual paper trading first.
That's the new lesson for this week so far!
________________________________________
If you leg in with another Vertical Spread forming a price channel, above and below, currently called an IRON CONDOR, the margin stays the same, as you only have to put margin on one side of the channel. Because only one side can get hit, if price action is volatile enough, or you put it in too close to the movement. I'm told that this usually wipes out both sides of the channel profit. The goal is to swallow an extra set of commissions and close out BEFORE you get hit, should the price go against you. That way if you had collected enough TIME DECAY already, you might even break even, or perhaps take a little cash home with you. It is very little, if you are lucky about +$15. Which is better than losing $300 by letting your threatened STRIKE PRICE get hit. Or even worse, by the price action going through your spread and consuming your margin at $500 a point. ( $2500 loss potential ) At least in a 5 contract spread, which I'm currently trading. The losses get bigger if you are hit, multiplied by the number of contracts you hold.
Some recommend closing out when you have 80% of the TIME DECAY, if you are close to the last day before EXPIRATION. Others say, you can do a ROLL OVER which means implementing ANOTHER Vertical Spread, another strike further away. Not faced those decisions or problems YET!
________________________________
Tuesday, April 13, 2010
SO YOU FIGURE YOU CAN GET RICH QUICK TRADING OPTIONS OR STOCKS? ( report #22 )
SO YOU FIGURE YOU CAN GET RICH QUICK - TRADING OPTIONS, OR STOCKS? Report #22
Can An Option Trader With A $100k Account Consistently Make $500 A Day?
Posted by Pete Stolcers on January 6
Option Trading Question
My question is simple, but best explained by telling what I want to do. I want to invest 100% of my money into stocks and make a net profit of .5% everyday. Buy, hold for 1 - 7 hours, sell and bank the .5%. Compounding everyday at .5% would be very profitable and I could retire in only a few years. Here is my thinking: stocks go up, down or sometimes do nothing. So all I need is to know is which stocks will move today, by at least .5%, and in which direction. It is true that most stocks move everyday! The expected return .5% is normal within most stocks daily range. The problem I have is pulling all the information together to say that there is a 95% chance that XYZ will drop today. The 0.5% is net after trading cost $10 + $1.50 per contract and the spread.
Option Trading Answer
In today’s option trading blog I’ll answer a question that makes it all sound easy. I’ve seen similar numbers used in infomercials. If I have $100k and I make $500 each day, that is 10k a month and $120k a year. All I would have to do is to make a half a point on a 1000 share stock trade each day to make it all work. If I compound that .5% daily, in the course of 10 years… I should be able to wipe out global starvation with my riches. I don’t want to sound demeaning in my response. The question is frequently asked and there are many “gurus” who claim it can be done.
First, let me bring you back down to earth and say that a 120% annual return is not achievable on a consistent basis. If a life-long trader does it once in his career, it is quite an accomplishment. I know that there are people who have turned $10k into $1 million but they were in the right place at the right time and luck played a huge role in their success. For every “rags to riches” example, there are 10,000 people who blew their account out. If these returns were easily attainable, one out of every five people you meet would be a stay-at-home trader. Stay at home, spend time with your kids, be your own boss, live the good life… these are the heart strings that are pulled by “snake oil” salesman who want to show you the path for a mere $3000. I’ve been in this business for over 17 years and you might have interest in reading about my experience of “going pro”. My story made the cover of Active Trader Magazine - September 2006.
Now, let me address some other parts of you question. Can a person trade in and out of positions, scalp the market and make profits - yes. Because of the short term nature of the trade, slippage and commissions take a huge bite out of profits. That means that options are out of the question. You have to trade stock and you need to find a company that caters to proprietary stock traders and offers a $.005 (half a penny) flat per share rate. Live data feeds, charting and advanced order entry features are a must. This is a very hard living and having done it, you’ll be tired at the end of the day. When you add up data feeds, health insurance, internet connections, software applications and computer hardware, you can expect the first $2k/month to go to overhead expenses. This type of trading is a grind and it is a very emotional experience. It can take 2-4 years just to get profitable. In the question you addressed the issue of being able to predict the direction of a stock. Bingo, that’s the whole problem! Expect to spend months reading about technical analysis and money management. Then expect to spend at least two years finding an edge and developing an approach. We’ve been in a major 4-year bull market and the trading has been fast and relatively predictable. When that ends, so will the careers of many scalpers (until the next major trend).
I believe the better way to trade is to form an opinion and to spend your time on research and analysis as opposed to reacting to every tick and blip on the screen. If you think about the richest traders in the world (George Soros and Warren Buffet) they did not scalp markets. They did extensive macro research and took long term positions. In day trading stock, you are not taking any overnight risk so you can’t expect to make large returns. If you form an opinion and take a directional stance for at least a week, your returns (and risk) go up dramatically.
As a professional trader, I expect to make 25% a year regardless of market conditions. This “tiny” return will drive many glory seekers away and that’s ok. There are many other people that will sell you a pipe-dream of riches. I have a systematic approach that has taken me years to develop and there are many years when I exceed my expectations. Day traders and option traders who have been around the block recognize the quality of my research and rely on it for trading ideas. Since I used your question, you can try a OneOption research report free for a month.
This is the easiest business to start and the hardest one to grow. Anyone with a wallet can pull up a chair.
Can An Option Trader With A $100k Account Consistently Make $500 A Day?
Posted by Pete Stolcers on January 6
Option Trading Question
My question is simple, but best explained by telling what I want to do. I want to invest 100% of my money into stocks and make a net profit of .5% everyday. Buy, hold for 1 - 7 hours, sell and bank the .5%. Compounding everyday at .5% would be very profitable and I could retire in only a few years. Here is my thinking: stocks go up, down or sometimes do nothing. So all I need is to know is which stocks will move today, by at least .5%, and in which direction. It is true that most stocks move everyday! The expected return .5% is normal within most stocks daily range. The problem I have is pulling all the information together to say that there is a 95% chance that XYZ will drop today. The 0.5% is net after trading cost $10 + $1.50 per contract and the spread.
Option Trading Answer
In today’s option trading blog I’ll answer a question that makes it all sound easy. I’ve seen similar numbers used in infomercials. If I have $100k and I make $500 each day, that is 10k a month and $120k a year. All I would have to do is to make a half a point on a 1000 share stock trade each day to make it all work. If I compound that .5% daily, in the course of 10 years… I should be able to wipe out global starvation with my riches. I don’t want to sound demeaning in my response. The question is frequently asked and there are many “gurus” who claim it can be done.
First, let me bring you back down to earth and say that a 120% annual return is not achievable on a consistent basis. If a life-long trader does it once in his career, it is quite an accomplishment. I know that there are people who have turned $10k into $1 million but they were in the right place at the right time and luck played a huge role in their success. For every “rags to riches” example, there are 10,000 people who blew their account out. If these returns were easily attainable, one out of every five people you meet would be a stay-at-home trader. Stay at home, spend time with your kids, be your own boss, live the good life… these are the heart strings that are pulled by “snake oil” salesman who want to show you the path for a mere $3000. I’ve been in this business for over 17 years and you might have interest in reading about my experience of “going pro”. My story made the cover of Active Trader Magazine - September 2006.
Now, let me address some other parts of you question. Can a person trade in and out of positions, scalp the market and make profits - yes. Because of the short term nature of the trade, slippage and commissions take a huge bite out of profits. That means that options are out of the question. You have to trade stock and you need to find a company that caters to proprietary stock traders and offers a $.005 (half a penny) flat per share rate. Live data feeds, charting and advanced order entry features are a must. This is a very hard living and having done it, you’ll be tired at the end of the day. When you add up data feeds, health insurance, internet connections, software applications and computer hardware, you can expect the first $2k/month to go to overhead expenses. This type of trading is a grind and it is a very emotional experience. It can take 2-4 years just to get profitable. In the question you addressed the issue of being able to predict the direction of a stock. Bingo, that’s the whole problem! Expect to spend months reading about technical analysis and money management. Then expect to spend at least two years finding an edge and developing an approach. We’ve been in a major 4-year bull market and the trading has been fast and relatively predictable. When that ends, so will the careers of many scalpers (until the next major trend).
I believe the better way to trade is to form an opinion and to spend your time on research and analysis as opposed to reacting to every tick and blip on the screen. If you think about the richest traders in the world (George Soros and Warren Buffet) they did not scalp markets. They did extensive macro research and took long term positions. In day trading stock, you are not taking any overnight risk so you can’t expect to make large returns. If you form an opinion and take a directional stance for at least a week, your returns (and risk) go up dramatically.
As a professional trader, I expect to make 25% a year regardless of market conditions. This “tiny” return will drive many glory seekers away and that’s ok. There are many other people that will sell you a pipe-dream of riches. I have a systematic approach that has taken me years to develop and there are many years when I exceed my expectations. Day traders and option traders who have been around the block recognize the quality of my research and rely on it for trading ideas. Since I used your question, you can try a OneOption research report free for a month.
This is the easiest business to start and the hardest one to grow. Anyone with a wallet can pull up a chair.
Friday, April 9, 2010
Report # 21, End of April 9th weekly accounting.
Photo of Grandpa Ray, OEX Option trader, with wife Silvia on left and daughter Diane on the right. 2010.GAINS OR LOSSES YEAR TO DATE ( March start )
EACH TYPE OF TRADING STARTED WITH A $5000 ACCOUNT, IN ORDER TO COMPARE THE RESULTS DURING THE LEARNING CURVE. The VIRTUAL ACCOUNT with the broker is supposed to evolve into a medly of the other three types of trading, depending on results and the learning process, of when to implement them in different market conditions. Since Option House does not offer weekly OEX option EXPIRATIONS, we will have to open an account with another broker for that part.
Virtual Account: OPTION HOUSE- no trading - remains at Balance of:( -37% )
Paper trading in Quickie Trading: +6%(reduced from 12% to +6%)
Credit Spread singles: ( paper trading ) +10%
Channel credit spreads called CONDORS (paper trading) +12%
Debit Spreads ( haven't started studying them yet ) (I'm also interested in eventually studying ratio spreads, diagonals and horizontals, and butterflies sometime. Got too much on my plate right now, trying to learn and absorb this stuff above.)
VIRTUAL ACCOUNT WITH "thinkorswim" brokerage VIRTUAL BULL CREDIT PUT SPREAD + 2.5 % WEEKLY EXPIRATION
Trend longer trading (6 or 8 per yr)( hasn't started yet )zero neutral
____________________________________
This week trade was only; a VERTICAL CREDIT BULL PUT SPREAD. Was only able to leg into one side and unable to complete a CONDOR CHANNEL.
Sold Weekly ( 5 contracts - $2500 margin ) 530 PUT for credit of + $150
Bought Weekly 525 PUT for debit = difference + .30 cents in spread
Expired for credit of + $150 - $25 commission = profit + $125, or 2 1/2% on $5000
I'd kept $2500 of the $5000 account in reserve for the other side of a CONDOR, which didn't happen.
_________________________________________________
LESSONS LEARNED THIS WEEK!
I was trying to confirm the CHANNELS for a CONDOR,also the parameters of safety, versus the spread allowable to give a decent return. One guy on the internet was saying; he bought on a Thursday to expire on Friday, using WEEKLIES. I tried that and it didn't work within my safety parameters and the decent return expected. In fact, it wasn't possible except at closer in - higher risk parameters. My accidental entry based on volatility seemed a good one. Will try it next week, on both sides of a CONDOR and see what happens?
For past trade details scroll down to Report # 12 of trade action.
http://oexoptiontradingexperience.blogspot.com ( history of learning experience )
http://westernbelizehappenings.blogspot.com ( photos and articles of living in Western Belize, foothills of the rural Belize Alps. )
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:
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
Sunday, April 4, 2010
THE STEEP LEARNING CURVE FOR SPREAD TRADING - report #19
THE STEEP LEARNING CURVE FOR SPREAD TRADING!
Been perusing the web to learn about credit spread experiences. I've been picking brains and actual experiences, to make a list of DO's and DON'TS, for my credit spread and particularly the CHANNEL (condors) CREDIT SPREADS as it pertains to my OEX INDEX trading. Should I EVER get good enough at this, to make steady money, would try some other index's. They all run in parallel more or less anyway, I notice. Ships float in harbor with the tide!
Hope I've got all my rules in place? ( grin! ) The only real big danger seems to be a one day BEAR MARKET sudden plunge? Buying back the SOLD PUTS would be my strategy to reacting to that; preferably BEFORE it hit my SOLD side of the CHANNEL. Otherwise you would get whopped with a big loss, maybe in your account, 50% gone!
Starting this week in early APRIL will be trying my ideas with the CREDIT SPREADS using THINK OR SWIM. Just got into their web site this morning and registered. Bit of a learning curve again, to putting on a spread and stuff to go through. I wanted to trade WEEKLIES on the OEX and don't know eventually if other indexes have weeklies? Unfortunately, OPTION HOUSE does not have OEX WEEKLIES. We shall see how it goes with THINK or SWIM?
Have to laugh, when somebody commented you can learn CREDIT SPREAD trading and IRON CONDORS in a few hours. Wheeew! Took me two weeks to figure it out, and look for the problems and the tricks to dealing with those problems. I notice a lot of SELLERS are advertising for MONEY, special tricks. Don't go that route myself. Don't need a BLACK BOX, like to be in charge of my own destiny. That way, nobody to blame but myself.
I had just read some guy's comments on the 90% brag that CREDIT SPREADS tout, as a profitable percentage. Whoever it was said that, commented; "that was misleading". Which I figured already, being an old fart, with enough experience in charlatans and soft soap sales pitches. I figure if you don't close your side of a CONDOR when threatened, you are going to lose 50% of your trading account, should the index trade through the sold side.
Anyway, just a running commentary, mostly for myself. To remind me when I look back at all this, to see if I was right or wrong in my opinions?
Something I'm trying to figure out? Is there actually any capability, or anybody really trading 50 contracts, per side on OEX WEEKLIES in IRON CONDORS? That is over a $100,000.
The 90% winning trades, versus 10% losing trades garbage, they say on some websites as a sales pitch, doesn't seem to cover that the 10% losing trades, only actually have to be ONE LOSING TRADE, to wipe out 'half your account' is what I'm figuring here for a CHANNEL CREDIT SPREADING called CONDOR? But I'm an amateur, untested with real cash, so what do I know? In the meantime, I think one has to periodically take some money off the table as a solution. Maybe every quarter?
Been perusing the web to learn about credit spread experiences. I've been picking brains and actual experiences, to make a list of DO's and DON'TS, for my credit spread and particularly the CHANNEL (condors) CREDIT SPREADS as it pertains to my OEX INDEX trading. Should I EVER get good enough at this, to make steady money, would try some other index's. They all run in parallel more or less anyway, I notice. Ships float in harbor with the tide!
Hope I've got all my rules in place? ( grin! ) The only real big danger seems to be a one day BEAR MARKET sudden plunge? Buying back the SOLD PUTS would be my strategy to reacting to that; preferably BEFORE it hit my SOLD side of the CHANNEL. Otherwise you would get whopped with a big loss, maybe in your account, 50% gone!
Starting this week in early APRIL will be trying my ideas with the CREDIT SPREADS using THINK OR SWIM. Just got into their web site this morning and registered. Bit of a learning curve again, to putting on a spread and stuff to go through. I wanted to trade WEEKLIES on the OEX and don't know eventually if other indexes have weeklies? Unfortunately, OPTION HOUSE does not have OEX WEEKLIES. We shall see how it goes with THINK or SWIM?
Have to laugh, when somebody commented you can learn CREDIT SPREAD trading and IRON CONDORS in a few hours. Wheeew! Took me two weeks to figure it out, and look for the problems and the tricks to dealing with those problems. I notice a lot of SELLERS are advertising for MONEY, special tricks. Don't go that route myself. Don't need a BLACK BOX, like to be in charge of my own destiny. That way, nobody to blame but myself.
I had just read some guy's comments on the 90% brag that CREDIT SPREADS tout, as a profitable percentage. Whoever it was said that, commented; "that was misleading". Which I figured already, being an old fart, with enough experience in charlatans and soft soap sales pitches. I figure if you don't close your side of a CONDOR when threatened, you are going to lose 50% of your trading account, should the index trade through the sold side.
Anyway, just a running commentary, mostly for myself. To remind me when I look back at all this, to see if I was right or wrong in my opinions?
Something I'm trying to figure out? Is there actually any capability, or anybody really trading 50 contracts, per side on OEX WEEKLIES in IRON CONDORS? That is over a $100,000.
The 90% winning trades, versus 10% losing trades garbage, they say on some websites as a sales pitch, doesn't seem to cover that the 10% losing trades, only actually have to be ONE LOSING TRADE, to wipe out 'half your account' is what I'm figuring here for a CHANNEL CREDIT SPREADING called CONDOR? But I'm an amateur, untested with real cash, so what do I know? In the meantime, I think one has to periodically take some money off the table as a solution. Maybe every quarter?
Thursday, April 1, 2010
report #18 on trading ending March, 2010, OEX Experiments
Good Friday long weekend
GAINS OR LOSSES YEAR TO DATE ( March start )
EACH TYPE OF TRADING STARTED WITH A $5000 ACCOUNT, IN ORDER TO COMPARE THE RESULTS DURING THE LEARNING CURVE. The VIRTUAL ACCOUNT with the broker is supposed to evolve into a medly of the other three types of trading, depending on results and the learning process, of when to implement them in different market conditions. Since Option House does not offer weekly OEX option EXPIRATIONS, we will have to open an account with another broker for that part.
Virtual Account: no trading - remains at Balance of:( -37% )
Paper trading in Quickie Trading: +6%(reduced from 12% to +6%)
Credit Spread singles: ( paper trading ) +7%
Channel credit spreads called CONDORS (paper trading) +12%
Debit Spreads ( haven't started studying them yet ) (I'm also interested in eventually studying ratio spreads and butterflies sometime. Got too much on my plate right now, trying to learn and absorb this stuff above.)
Trend longer trading (6 or 8 per yr)( hasn't started yet )zero neutral
For details scroll down to Report # 12 of trade action.
http://oexoptiontradingexperience.blogspot.com ( history of learning experience )
http://westernbelizehappenings.blogspot.com ( photos and articles of living in Western Belize, foothills of the rural Belize Alps. )
GAINS OR LOSSES YEAR TO DATE ( March start )
EACH TYPE OF TRADING STARTED WITH A $5000 ACCOUNT, IN ORDER TO COMPARE THE RESULTS DURING THE LEARNING CURVE. The VIRTUAL ACCOUNT with the broker is supposed to evolve into a medly of the other three types of trading, depending on results and the learning process, of when to implement them in different market conditions. Since Option House does not offer weekly OEX option EXPIRATIONS, we will have to open an account with another broker for that part.
Virtual Account: no trading - remains at Balance of:( -37% )
Paper trading in Quickie Trading: +6%(reduced from 12% to +6%)
Credit Spread singles: ( paper trading ) +7%
Channel credit spreads called CONDORS (paper trading) +12%
Debit Spreads ( haven't started studying them yet ) (I'm also interested in eventually studying ratio spreads and butterflies sometime. Got too much on my plate right now, trying to learn and absorb this stuff above.)
Trend longer trading (6 or 8 per yr)( hasn't started yet )zero neutral
For details scroll down to Report # 12 of trade action.
http://oexoptiontradingexperience.blogspot.com ( history of learning experience )
http://westernbelizehappenings.blogspot.com ( photos and articles of living in Western Belize, foothills of the rural Belize Alps. )
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