Posted by focus175 on 23rd of Oct 2021 at 01:19 pm
Spy LEAPS
I don't have much experience with options other then doing
basic buy call/put options when the Spy System triggers, but
I had the idea to look at LEAPs for Spy, with the purpose of buying
when we are in an uptrend, the S&P corrects say 10% or so and
the Spy System has triggered. The reason for a LEAP would be then I
can hold for a longer move where with buying a few months out
there's obviously the time factor decay issue. The thought is
to still sell it for a profit a few months after buying. Curious if
anyone else buys LEAPS on indexes, and how much time do you have
before time decay starts taking much effect?
Posted by mitchell on 25th of Oct 2021 at 09:40 am
I do a somewhat similar strategy w/ 3-6 mos out calls, but Ive
learned to not just 'buy and hold' options; must play the cycles. I
always remind myself the other side of an options contract is typ
an algo, so have conviction. Paper trade your strategy first...
Posted by jj4376jc on 25th of Oct 2021 at 09:28 am
I trade options often, though I don't trade LEAPs. If you are
considering trading options based on Matt's systems, or some other
system that is fairly short term in duration, I would recommend
shorter term contracts. As short as 2 weeks to maybe 3 months out.
My favorite type trades are Calendar spreads and Diagonal Spreads.
Before doing any of that be sure you take the time to understand
the effects of volatility on options. As an example if you buy
calls after a quick drop in price of the market, you could be
paying a large premium to intrinsic value simply for the price of
volatility. IMHO, that is the best time to sell options, not buy.
When volatility begins to drop, the price of the option will
decrease, all else being equal. Sorry if you knew all this already,
I just get nervous when the fist sentence is "I don't have
much experience with options", LOL. Read lots of books, and make a
few practice trades before using real cash. Just my two cents.
Posted by ruscitti on 24th of Oct 2021 at 05:32 pm
One thing you can consider is to sell a higher strike call
against your long call position. That helps a little with
time decay, particularly over a long period. With a long call/
short higher strike call position, you can also consider
periodically trading in and out of the sold call position to
further enhance your performance. I've done that with shorter
term options (I have never traded LEAPs), but I can't think why
this wouldn't work with LEAPs. Bid/offer spread would
probably be a consideration. If LEAPs were less liquid,
trading in and out would be more expensive. The nice thing
about this strategy is that you can employ it even in tax deferred
accounts (401-k/IRAs).
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Spy LEAPS I don't have much
Posted by focus175 on 23rd of Oct 2021 at 01:19 pm
Spy LEAPS
I don't have much experience with options other then doing basic buy call/put options when the Spy System triggers, but I had the idea to look at LEAPs for Spy, with the purpose of buying when we are in an uptrend, the S&P corrects say 10% or so and the Spy System has triggered. The reason for a LEAP would be then I can hold for a longer move where with buying a few months out there's obviously the time factor decay issue. The thought is to still sell it for a profit a few months after buying. Curious if anyone else buys LEAPS on indexes, and how much time do you have before time decay starts taking much effect?
I do a somewhat similar
Posted by mitchell on 25th of Oct 2021 at 09:40 am
I do a somewhat similar strategy w/ 3-6 mos out calls, but Ive learned to not just 'buy and hold' options; must play the cycles. I always remind myself the other side of an options contract is typ an algo, so have conviction. Paper trade your strategy first...
I trade options often, though
Posted by jj4376jc on 25th of Oct 2021 at 09:28 am
I trade options often, though I don't trade LEAPs. If you are considering trading options based on Matt's systems, or some other system that is fairly short term in duration, I would recommend shorter term contracts. As short as 2 weeks to maybe 3 months out. My favorite type trades are Calendar spreads and Diagonal Spreads. Before doing any of that be sure you take the time to understand the effects of volatility on options. As an example if you buy calls after a quick drop in price of the market, you could be paying a large premium to intrinsic value simply for the price of volatility. IMHO, that is the best time to sell options, not buy. When volatility begins to drop, the price of the option will decrease, all else being equal. Sorry if you knew all this already, I just get nervous when the fist sentence is "I don't have much experience with options", LOL. Read lots of books, and make a few practice trades before using real cash. Just my two cents.
Very well stated.
Posted by bverse on 25th of Oct 2021 at 10:11 am
Very well stated.
One thing you can consider
Posted by ruscitti on 24th of Oct 2021 at 05:32 pm
One thing you can consider is to sell a higher strike call against your long call position. That helps a little with time decay, particularly over a long period. With a long call/ short higher strike call position, you can also consider periodically trading in and out of the sold call position to further enhance your performance. I've done that with shorter term options (I have never traded LEAPs), but I can't think why this wouldn't work with LEAPs. Bid/offer spread would probably be a consideration. If LEAPs were less liquid, trading in and out would be more expensive. The nice thing about this strategy is that you can employ it even in tax deferred accounts (401-k/IRAs).