Posted by DigiNomad on 17th of May 2023 at 04:28 pm
If you are playing with sizes that come anywhere near your
margins, I would definitely advise the standard defense for short
call spreads - roll out a month, and up to a strike that gives you
the same amount of premium that you just bought back when taking
the loss. You might not be able to go all the way up to
another 16 delta strike, but you want to keep the premium level the
same as the position you just conceded, or you are potentially
locking in a loss. *TastyTrade would advise that you should
never roll out and up unless you're taking in more credit...I'm
sometimes fine with a wash on the credit, if it gives me a safer
level to be short.
The method I described of rolling up in the same month and
doubling down the amount of contracts is only safe (relatively
speaking) if you are trading VERY small relative to your net
liquidation (premium sold under 4% of net liq, or so).
DigiNomad, I can free up some buying power once I get a feel of
the method. I am holding two losing put positions at the moment --
based on Jim Rickards Income strategy (which does not seem to work
at all) -- which should be resolved one way or the other.
Posted by DigiNomad on 17th of May 2023 at 04:41 pm
30 DTE is fine. But with the VIX this low, I find I have
to move out farther to sell levels I'm comfortable with (after
listening to Matt & Steve every night, of course
)
It's almost hard to lose with credit spreads unless you take
too much risk or get greedy. You are literally the
House...and "The House always wins." I'm being facetious,
but only a little. The odds are grossly in the favor of the person
selling premium vs buying it. If you stick to a plan and have
solid risk management in place as part of that plan, you will be
successful. Don't swing for the fences!
30DTE should drop the premium faster, I reckon. I am going to
play this lightly, keeping in mind the 4300 target on SPX, which
everyone knows about. Selling the premium is the way to go!
I will post my developments on this blog. I like to let the
position expire worthless although premium drops fast in the last 3
weeks before expiry. Thank you again!
Posted by DigiNomad on 17th of May 2023 at 04:55 pm
Watch some TastyTrade content on YouTube or their website. They
have study after study showing which DTE, delta, etc are best.
They approach it very objectively. For example, based
on many studies conducted, they make the case that you should NOT
hold until expiration. In fact, they say the sweet spot is to take
profits at 50% and manage at 21 DTE. I don't always follow
their recommendations on this point (greed), but I never hold until
expiration....maybe 1% of the time over the last 15 years or so.
For what it's worth, don't make the mistake of getting sucked
into that world and forgetting about BPT - I think this group and
the newsletters are critical to my success as a credit spread
trader!
I know of the argument against holding to expiration for 0DTE.
The last week may add almost nothing to the credit owing but will
hog up the margin. It is a very good argument against doing
that.
Junkie, DigiNomad. You guys are sharing some very good option
trades but I must warn the newby's that unless they have been
trading options for some time and have good experience doing so
that these are high risk option trades. However I have posted the
trade on my TOS paper trading account and will follow the trade as
you guys post. Good Luck Junkie.
mundy, selling premium is inherently risky. The bottom line is
either 50% of the credit received (about $160 per spread) in 2
months is either worth the trouble of holding a position or
not.
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DigiNomad, I bought $SPX Jul 21 4400/4425 Bear CS on ...
Posted by DigiNomad on 17th of May 2023 at 04:28 pm
If you are playing with sizes that come anywhere near your margins, I would definitely advise the standard defense for short call spreads - roll out a month, and up to a strike that gives you the same amount of premium that you just bought back when taking the loss. You might not be able to go all the way up to another 16 delta strike, but you want to keep the premium level the same as the position you just conceded, or you are potentially locking in a loss. *TastyTrade would advise that you should never roll out and up unless you're taking in more credit...I'm sometimes fine with a wash on the credit, if it gives me a safer level to be short.
The method I described of rolling up in the same month and doubling down the amount of contracts is only safe (relatively speaking) if you are trading VERY small relative to your net liquidation (premium sold under 4% of net liq, or so).
DigiNomad, I can free up
Posted by junkie on 17th of May 2023 at 04:36 pm
DigiNomad, I can free up some buying power once I get a feel of the method. I am holding two losing put positions at the moment -- based on Jim Rickards Income strategy (which does not seem to work at all) -- which should be resolved one way or the other.
Is 30DTE are too volatile for this purpose?
30 DTE is fine. But
Posted by DigiNomad on 17th of May 2023 at 04:41 pm
30 DTE is fine. But with the VIX this low, I find I have to move out farther to sell levels I'm comfortable with (after listening to Matt & Steve every night, of course )
It's almost hard to lose with credit spreads unless you take too much risk or get greedy. You are literally the House...and "The House always wins." I'm being facetious, but only a little. The odds are grossly in the favor of the person selling premium vs buying it. If you stick to a plan and have solid risk management in place as part of that plan, you will be successful. Don't swing for the fences!
30DTE should drop the premium
Posted by junkie on 17th of May 2023 at 04:50 pm
30DTE should drop the premium faster, I reckon. I am going to play this lightly, keeping in mind the 4300 target on SPX, which everyone knows about. Selling the premium is the way to go!
I will post my developments on this blog. I like to let the position expire worthless although premium drops fast in the last 3 weeks before expiry. Thank you again!
Watch some TastyTrade content on
Posted by DigiNomad on 17th of May 2023 at 04:55 pm
Watch some TastyTrade content on YouTube or their website. They have study after study showing which DTE, delta, etc are best. They approach it very objectively. For example, based on many studies conducted, they make the case that you should NOT hold until expiration. In fact, they say the sweet spot is to take profits at 50% and manage at 21 DTE. I don't always follow their recommendations on this point (greed), but I never hold until expiration....maybe 1% of the time over the last 15 years or so.
For what it's worth, don't make the mistake of getting sucked into that world and forgetting about BPT - I think this group and the newsletters are critical to my success as a credit spread trader!
I know of the argument
Posted by junkie on 17th of May 2023 at 05:00 pm
I know of the argument against holding to expiration for 0DTE. The last week may add almost nothing to the credit owing but will hog up the margin. It is a very good argument against doing that.
Junkie, DigiNomad. You guys are
Posted by mundy on 17th of May 2023 at 09:16 pm
Junkie, DigiNomad. You guys are sharing some very good option trades but I must warn the newby's that unless they have been trading options for some time and have good experience doing so that these are high risk option trades. However I have posted the trade on my TOS paper trading account and will follow the trade as you guys post. Good Luck Junkie.
mundy, selling premium is inherently
Posted by junkie on 18th of May 2023 at 01:21 am
mundy, selling premium is inherently risky. The bottom line is either 50% of the credit received (about $160 per spread) in 2 months is either worth the trouble of holding a position or not.