I would not favor going too short - I don't like to start
anything less than 30 days and your choice seems about right to me.
Less of an issue with delta 85's but even at delta 70's, the
time decay which really kicks in at 30 days starts to bite. See
general chart below - I assume this is at the money mmodel (delta
50).
It makes little difference to price (and hence leverage) once
you go past 30 days - see attached for comparison of Aug and Sept
delta 85 options - 17.10 vs 21.70. Also note that short term
options are much cheaper.
But here are the time decay calculations:
July @ 11.71, theta is 10.7 c per day - 0.91% per day (which
increases with time as do all the numbers below)
Aug @ 17.10, theta is 7.37 c per day - 0.43% per day
Sept @ 21.70, theta is 6.45 c per day - 0.30% per day
I have attached risk graphs for the three dates using roughly
the same $ invested - as you can see there is little difference
between Aug and Sept but July has much higher risk of losing and
making money quickly. I have also included 2 screen shots of
data behind this comment.
My summary would be that people should look at increasing
their risk in steps with SPY Pro system and pick which level they
are most comfortable with;
1. SPY
2. 2 or 3 x SPY ETFs
3. Spy in the money high delta options - 60 days out - this
level is where you are really using options as stock substitute
rather than making an option trade
4. Spy in the money options closer in time
5. Spy at the money options
6. Spy out of the money options etc.
My advice would be to start with 1 and then increase as you
get comfortable with the high probabilities and are willing to take
more risk (so I agree with your suggestion on this approach)
- recall with an option, you can be right and still loose
money!
SPY
Just to clarify on the SPY system around the leverage ...
Posted by sonofrebel on 28th of Jun 2019 at 08:24 am
I would not favor going too short - I don't like to start anything less than 30 days and your choice seems about right to me. Less of an issue with delta 85's but even at delta 70's, the time decay which really kicks in at 30 days starts to bite. See general chart below - I assume this is at the money mmodel (delta 50).
It makes little difference to price (and hence leverage) once you go past 30 days - see attached for comparison of Aug and Sept delta 85 options - 17.10 vs 21.70. Also note that short term options are much cheaper.
But here are the time decay calculations:
July @ 11.71, theta is 10.7 c per day - 0.91% per day (which increases with time as do all the numbers below)
Aug @ 17.10, theta is 7.37 c per day - 0.43% per day
Sept @ 21.70, theta is 6.45 c per day - 0.30% per day
I have attached risk graphs for the three dates using roughly the same $ invested - as you can see there is little difference between Aug and Sept but July has much higher risk of losing and making money quickly. I have also included 2 screen shots of data behind this comment.
My summary would be that people should look at increasing their risk in steps with SPY Pro system and pick which level they are most comfortable with;
1. SPY
2. 2 or 3 x SPY ETFs
3. Spy in the money high delta options - 60 days out - this level is where you are really using options as stock substitute rather than making an option trade
4. Spy in the money options closer in time
5. Spy at the money options
6. Spy out of the money options etc.
My advice would be to start with 1 and then increase as you get comfortable with the high probabilities and are willing to take more risk (so I agree with your suggestion on this approach) - recall with an option, you can be right and still loose money!
I posted a detailed follow
Posted by sonofrebel on 28th of Jun 2019 at 09:10 am
I posted a detailed follow up here with screen shots but seems tohave disapeared? If so, can repost later - if it re-appears, it would be nice
Thanks for you post -
Posted by steve on 28th of Jun 2019 at 09:17 am
Thanks for you post - just click on the "Title:SPY" to expand your post. Since it was so detailed and long it was condensed.