A question came up among several of us this morning. In those
rare instances where you are in a long trade, get a signal to exit
AND go short, how do you accomplish the trade, particularly in
an IRA where you have no margin? You are supposed to exit the long
on the next day's open but are to go short at today's close. If you
are trading more than half of your capital, you can't go short
(even using SH) without first exiting your longs!
I was also thinking about trading, options. Since it is end of
the day system will be difficult as Options markets would
have closed and will have to take the trade the
next day. Results could definitely vary. Agree with you
that capital is low.
Options on the SPY trade for 10 or 15 min after the 4PM
close....not as liquid then and you need to be careful for a good
entry but they trade.
And if you buy them in the next to front month (like June now,
or even anothe month out like July) on an average 12 day hold you
will be fine....2-3 months hold could be a big problem.
the problem with options is that you will also have a time
delay, the average trade length is about 12 days, however some
trades last 2 - 3 months, so these are things that you have to
account for. And yes you cannot sell options after hrs, which
would have been a problem yesterday
The thing about options is you need to take into account what
premiums you're paying, loss of option value due to time
degradation. The longer the underlying doesn't go in your
direction, or if it trades flat, the faster the option value is
going to go down as it gets closer to expiration. Your options
could expire out of the money depending on the month and strike
price that you took out. The SPY system could stay in the trade for
over a month. Make sure you take that into account when you decide
which options to take out (month, strike price, at-the-money,
in-the-money).
Another way to play options is to be an option writer. I'm going
to write options from time to time when playing the SPY system
depending on the situation. There are certain big advantages to
writing options over buying options, and some disadvantage too, but
I wouldn't recommend them without having a deep knowledge
first.
I have been trading SSO and SDS in an IRA for awhile. I am just
switching the buy/sell signals to Matt's SPY sysyem because, well,
it works much better than what I have been doing based on Matt's
Tradestation backtesting.
What I do is buy 50% of the account at a time in the double ETF.
That way whenever I close out a trade, I have one more bullet in
the chamber.
I have a personal hard rule to never put more than 50% of any
account in any ETF that holds only derrivatives, swaps, smoke and
mirrors (such as SSO and SDS) as opposed to an ETF that holds the
actual stock in companies that make up an index, like SPY does.
SPY System
Posted by bobhug on 4th of May 2011 at 05:12 pm
Matt:
A question came up among several of us this morning. In those rare instances where you are in a long trade, get a signal to exit AND go short, how do you accomplish the trade, particularly in an IRA where you have no margin? You are supposed to exit the long on the next day's open but are to go short at today's close. If you are trading more than half of your capital, you can't go short (even using SH) without first exiting your longs!
Bob
Consider using options, you don't
Posted by cclammers on 5th of May 2011 at 05:32 am
Consider using options, you don't need as much capital for the same or greater gains (or losses).
Regarding Options
Posted by kattap on 5th of May 2011 at 09:47 am
I was also thinking about trading, options. Since it is end of the day system will be difficult as Options markets would have closed and will have to take the trade the next day. Results could definitely vary. Agree with you that capital is low.
thanks
kattap
Options trade for 10-15 min
Posted by perthx on 5th of May 2011 at 10:55 am
Options on the SPY trade for 10 or 15 min after the 4PM close....not as liquid then and you need to be careful for a good entry but they trade.
And if you buy them in the next to front month (like June now, or even anothe month out like July) on an average 12 day hold you will be fine....2-3 months hold could be a big problem.
the problem with options is
Posted by matt on 5th of May 2011 at 10:19 am
the problem with options is that you will also have a time delay, the average trade length is about 12 days, however some trades last 2 - 3 months, so these are things that you have to account for. And yes you cannot sell options after hrs, which would have been a problem yesterday
The thing about options is
Posted by cw12 on 5th of May 2011 at 12:58 pm
The thing about options is you need to take into account what premiums you're paying, loss of option value due to time degradation. The longer the underlying doesn't go in your direction, or if it trades flat, the faster the option value is going to go down as it gets closer to expiration. Your options could expire out of the money depending on the month and strike price that you took out. The SPY system could stay in the trade for over a month. Make sure you take that into account when you decide which options to take out (month, strike price, at-the-money, in-the-money).
Another way to play options is to be an option writer. I'm going to write options from time to time when playing the SPY system depending on the situation. There are certain big advantages to writing options over buying options, and some disadvantage too, but I wouldn't recommend them without having a deep knowledge first.
My Response to Bob's Question
Posted by dougmil on 4th of May 2011 at 06:28 pm
Bob,
I have been trading SSO and SDS in an IRA for awhile. I am just switching the buy/sell signals to Matt's SPY sysyem because, well, it works much better than what I have been doing based on Matt's Tradestation backtesting.
What I do is buy 50% of the account at a time in the double ETF. That way whenever I close out a trade, I have one more bullet in the chamber.
I have a personal hard rule to never put more than 50% of any account in any ETF that holds only derrivatives, swaps, smoke and mirrors (such as SSO and SDS) as opposed to an ETF that holds the actual stock in companies that make up an index, like SPY does.
Doug Milliken
Title: My Response to Bob's
Posted by bobhug on 7th of May 2011 at 08:41 am
Doug:
Thanks! That's a great way around the issue.
Bob