Hi all, Well a successful week has passed. I hope all of you found the same. For the coming week I am looking at a few weekly spreads. Mostly puts but some possible call spreads.
I will wait until I have clear feeling for Monday or wait until Tuesday or even Wednesday. Like most traders I have to fight the feeling that "I should be trading something" It is ok to wait until Wednesday or even Thursday. You might have to take .07% by waiting but you do eliminate a lot of TIME, and as we know, time can equal trouble. So I'm looking at some aapl maybe 305/300
AMZN maybe 170/175
bidu 105/110 and calls maybe 205/200
pcln 470/480 calls maybe 555/560
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I will watch and as time goes by I will move the strike a little closer.
Good luck all
Jerry
9 comments:
Hi Jerry had a question. In your book one of the main exit criteria was to exit the position when the option premium doubles. How does this apply to put spreads as both option legs move. Are there any general rules that can be applied here to set up stop orders after buying spreads or we have to monitor and take a decision based on some criteria?
I Avid, So far I have set spreads far enough out of the money that I have not had one double. Also when I wrote the the book weeklys were not available. One reason for the rule was that an option could double with two or three weeks left and if not closed the premium could continue on until financial disaster happened. So for now I probably wouldn't close unless something happened on the first day of opening the position. With weeklys the time evaporation is so fast that as long as I had decent cushion I would hold on to the position. I roughly figure that 5 points of day is enough cushion. But I look for more.. the five is just a rough benchmark to judge if I am safe. Kind of a vague answer, I hope I helped.
Jerry
Thank you, that makes sense. What I am trying to figure out is, is there any way to set automatic stop orders once a spread is open. For example, AAPL dropped 15 points on March 16th from prior day's close to 330. It started that Monday at 353. If we had a weekly pos it might have been very close or a slight loss even on 20 or 25 point spread.
Also any idea why the SPX weekly spreads (or SPX in general) have a lot of cushion but still good returns? It almost looks like a free lunch sometimes :) May be institutional investors are hedging their long positions at higher cost for some reason?
Been lurking for a week awaiting account setups and clarity/confidence to pursue this. Thanks Jerry for the invite to join this forum. Loved the book 'cause I could fully understand selling puts, even the "infinite risk" part. But I'm having some difficulty getting my aged mind around the spread concept. What's the worst thing that could happen, say one successfully places the above AMNZ 170/175? Does the bot put insulate fully on the downside?
Speaking outta turn - Yes, safensimple (love the name), the 2nd (bot) put limits the downside to the difference in strike prices, or $500/c for the AMZN spread noted above.
Jerry - Looks like you found some winners for next week. I'm still realing from falling face first into my first iron condor with a perfect landing.
Cheers all,
rick
Hi all, I get many many questions regarding selling puts or calls in a spread. I have written a 13 page article explaining how I do them. It is of course not the definitive way to trade spreads, just what I am doing with very good results. The extra chapter to the book is free to anyone that wants it. Just email me at putman3232@yahoo.com and request a copy. There are probably many of you that have traded spreads longer than I but the 13 page chapter will get beginners going in what i hope is the right direction.
I will put this on the front page of the blog for all to see. You will have to excuse any mistakes in editing as I just wrote it off the top of my head... and let me tell you that is uncomfortable..lol
The article does reference the book often so if you have not bought the book, pick it up and you will have the complete guide to our way of using options.
Jerry
Jerry,
Looks as though the "ask" price for the PCLN 470 wkly is rather expensive this week, $200,001.00 That's going to be one heck of a spread...LOL.
Gssound said...
Avid,
There are a bunch of good SPX spreads out there. If you are going for the put side, give yourself some room, 60 to 75 points at least. I am thinking the SPX will be moving down a bit after Friday's downturn. Even the futures are down tonight. A call spread at 1370/75 should be just fine. I think after tomorrow you might see a 50 point cushion with a bearish view. That is just my take. If I do any SPX spread tomorrow I will be rolling with 1250/55 and 1370/75.
Thanks for the possible trades Jerry.
Chris
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