DigiNomad, assuming that you took 4370-4420 Bear CS last
at 4160 on SPX cash index, and the market moves to touch 4230. How
would you defend your position by doubling up?
If the market moves 5 waves down from 4160, you could close your
position for a profit, I assume in order to buy higher again. I
could replace the 5 waves with a measured move from a pattern
(wedge, etc.).
Posted by DigiNomad on 15th of May 2023 at 05:18 pm
It's hard but when the market moves against me hard I try and
take the pain until I actually get touched (as long as it's not
much above 200% of credit) then I roll up to the next 16 delta
short strike and add spread contracts until I'm back to the same
premium level (often a double). It's definitely not the
textbook way of doing it. I would ONLY do it with large, stable
index trades (SPX, but never something like IBB). If you used
this same method with single stock options, you would eventually
get your ass handed to you and break your account.
Posted by DigiNomad on 15th of May 2023 at 05:25 pm
That and diffusion. Because SPX has 500 components, there's not
much chance of it squeezing to the moon and crashes to the downside
are also much less likely to maintain momentum past a standard
deviation or 2...maybe 3, but only on very rare occasions. If
you sell 16 delta on an index and wait to defend until that strike
gets touched, you are rolling at an extreme, by definition. It's
only supposed to reach that price 16% of the time.
DigiNomad, assuming that you took
SPX Daily
Posted by junkie on 15th of May 2023 at 05:13 pm
DigiNomad, assuming that you took 4370-4420 Bear CS last at 4160 on SPX cash index, and the market moves to touch 4230. How would you defend your position by doubling up?
If the market moves 5 waves down from 4160, you could close your position for a profit, I assume in order to buy higher again. I could replace the 5 waves with a measured move from a pattern (wedge, etc.).
It's hard but when the
Posted by DigiNomad on 15th of May 2023 at 05:18 pm
It's hard but when the market moves against me hard I try and take the pain until I actually get touched (as long as it's not much above 200% of credit) then I roll up to the next 16 delta short strike and add spread contracts until I'm back to the same premium level (often a double). It's definitely not the textbook way of doing it. I would ONLY do it with large, stable index trades (SPX, but never something like IBB). If you used this same method with single stock options, you would eventually get your ass handed to you and break your account.
Yes, liquidity is the key
Posted by junkie on 15th of May 2023 at 05:21 pm
Yes, liquidity is the key here.
That and diffusion. Because SPX
Posted by DigiNomad on 15th of May 2023 at 05:25 pm
That and diffusion. Because SPX has 500 components, there's not much chance of it squeezing to the moon and crashes to the downside are also much less likely to maintain momentum past a standard deviation or 2...maybe 3, but only on very rare occasions. If you sell 16 delta on an index and wait to defend until that strike gets touched, you are rolling at an extreme, by definition. It's only supposed to reach that price 16% of the time.
Do you work on daily
Posted by junkie on 15th of May 2023 at 05:29 pm
Do you work on daily charts or weekly charts for 3 StandDiv's? I would work with 3ATR Keltner channels and a weekly chart for this method.
One standard deviation is equivalent
Posted by DigiNomad on 15th of May 2023 at 05:30 pm
One standard deviation is equivalent to a 16 delta option
ok.
Posted by junkie on 15th of May 2023 at 05:30 pm
ok.
I could try to paper
Posted by junkie on 15th of May 2023 at 05:25 pm
I could try to paper trade with all this information now. Thank you very much, DigiNomad!