Watch HowardCohodas Trade Index Options Credit Spreads

[RPEX]

Therefore, without a change in the use of options as a mechanism to reduce the current opportunity, I'm left with the somewhat uncomfortable conclusion that the opportunity is built into the system. However, it that were true, why are there relatively few of us practicing this technique?

Call me confused.

Dunno, i think there are quite a few options advisory services specialising in this already. For example MCTO and CondorOptions.com, and the slightly more hysterical spreadthetrend, oh and this. Maybe it's because they make it look too easy, and with the combination of poor graphics and upward trending charts if i was a newbie i would stay well away because it stinks of a con.

Away from the retail end, i was talking to some MMs, and it seems everyone has known people who play these kinds of strategies (net short premium in general) but they come and go, not sustainable in the long term etc. Personally, i thought it was great for a while but i can't live with the risk:reward even if it works out over the long term, just a personal preference.

Good luck

 

[meanreversion]

What it boils down to is you need to take a view on the greeks, whether it's delta, gamma or vega. Or if you want to stretch yourself, go to a second order derivative, e.g. dvega/dspot, otherwise known as skew. Or you could trade dvega/dvol (buy or sell a butterfly).

I think the average punter's best chance at making money from options is using them directionally, e.g. buying a low delta call if the view is spot is going higher. I've seen some spectacular winners from this type of approach.

However, most punters, because they sit and stare at their screen all day, feel the need to be short gamma. Look - spot hasn't moved for an hour, I'm going to sell some 1 week strangles.. that type of thing.

Now, there's nothing to say you can't make money being short gamma, but you require realized vol to be lower than the implied rate you sold, nothing surprising there.

Whichever approach is adopted, I would strongly advise keeping the strategy as simple as possible.. you don't want to have 10 strikes floating around because when the market boots off, you'll struggle with both liquidity and simply keeping on top of the position.

 

[HowardCohodas]

Dunno, i think there are quite a few options advisory services specialising in this already. For example MCTO and CondorOptions.com, and the slightly more hysterical spreadthetrend, oh and this. Maybe it's because they make it look too easy, and with the combination of poor graphics and upward trending charts if i was a newbie i would stay well away because it stinks of a con.

Away from the retail end, i was talking to some MMs, and it seems everyone has known people who play these kinds of strategies (net short premium in general) but they come and go, not sustainable in the long term etc. Personally, i thought it was great for a while but i can't live with the risk:reward even if it works out over the long term, just a personal preference.

Good luck

Thanks for helping me add to my list of potential competitors.

So far, as I've examined what others are doing, I think I have a couple of elements of my methods that reduce the risk considerably and increase the income modestly.

1. How I select the spreads
2. How I choose when to form an Iron Condor
3. How I manage the spreads through rolling

I hope when I go commercial, I don't succumb to the temptation to do the kind of sleazy promotion style that is endemic in this field.

I'm putting a lot of effort into developing the course materials and content. I hope the quality I deliver will also differentiate me from the others.

 

[HowardCohodas]

Whichever approach is adopted, I would strongly advise keeping the strategy as simple as possible.. you don't want to have 10 strikes floating around because when the market boots off, you'll struggle with both liquidity and simply keeping on top of the position.

Major market moves are definitely one of my concerns. Currently, I manage this element of risk with contingency orders. However liquidity and competence of the firm executing them remains a risk factor.

Am I ready for takeoff? I think so.

Am I ready to handle an in-flight emergency? I think so.

Do I have a working parachute? I think so.

Will I make a successful landing. I think so.

Have I thought of everything? I doubt it, but I hope so. When your a pilot, you are always a student.

And so it is with trading.

 

[arabianights]

Howard what I don't understand is why you want to go commercial with this?

It would seem far more logical to go into fund management of some kind, operating this strategy, if it works.

You do write very well though...

 

[HowardCohodas]

Howard what I don't understand is why you want to go commercial with this?

It would seem far more logical to go into fund management of some kind, operating this strategy, if it works.

You do write very well though...

I have an aversion to being responsible for other people's money. After all, I could be wrong. With my own money, I can handle being wrong. I'll even post it here. With other peoples money ...

I love to teach. Sometimes I think I'm even good at it.

Thank you for the complement on my writing. It doesn't come easily. I may edit and sometimes rewrite a thread over several minutes before posting. And still, when I read it later I am not satisfied.

 

[meanreversion]

I have an aversion to being responsible for other people's money. After all, I could be wrong. With my own money, I can handle being wrong. I'll even post it here. With other peoples money ...

Technically, it's not really YOUR money as such. It's also your wife's and your kids' (this is what my wife told ME recently )

 

[Martinghoul]

In the account we are discussing, that's correct. All I do is credit spreads. Iron Condors are just icing on the cake, but managed as two separate credit spreads.

H'edge... I like it.

So that's just being outright long/short the underlying (depending on whether it's puts or calls), outright short vol and other sundry sensitivities. So, basically, if the mkt moves sharply the wrong way, you're gonna get absolutely hosed on both direction and vol. Obv, you're not gonna get wiped out, but it's not gonna be pretty. I was confused before. If this is all you're doing, H'edge isn't any sort of edge.

 

[scose-no-doubt]

So that's just being outright long/short the underlying (depending on whether it's puts or calls), outright short vol and other sundry sensitivities. So, basically, if the mkt moves sharply the wrong way, you're gonna get absolutely hosed on both direction and vol. Obv, you're not gonna get wiped out, but it's not gonna be pretty. I was confused before. If this is all you're doing, H'edge isn't any sort of edge.

 

[HowardCohodas]

Technically, it's not really YOUR money as such. It's also your wife's and your kids' (this is what my wife told ME recently )

You're right. However, my kids are now on their own and doing well. I paid for their undergraduate education and in return promised to live long enough to become a burden to them. We'll see how that works out.

In spite of my wife's enthusiasm for what I am doing and her learning to do the same, we started this trading method with less than 20% of our liquid assets. My wife has suggested that I'm doing better on my 20% than the professionals are doing on the 80% and maybe we should change the ratio. In fact, my account now represents more than 20% of my liquid assets.

I'm naturally cautious and you guys have given me fair warning that many have tried and eventually blown up their accounts with similar methods. Are my methods sufficiently different than their's? I don't know. So it's status quo for the time being.

 

[DionysusToast]

I have an aversion to being responsible for other people's money. After all, I could be wrong. With my own money, I can handle being wrong. I'll even post it here. With other peoples money ...

I love to teach. Sometimes I think I'm even good at it.

Thank you for the complement on my writing. It doesn't come easily. I may edit and sometimes rewrite a thread over several minutes before posting. And still, when I read it later I am not satisfied.

If you are teaching people a method - you still have some responsibility.

If the naysayers on here are correct - you will at some point wipe out. Your students will wipe out too. With the complexities involved, you have to understand that the claim of students having to do due diligence before trading your methods will be a tad hollow when the level of knowledge required to do that due diligence is high.

In fact, as you write so well and project yourself so well, you will gain people's confidence, possibly to the extent that they decide to forgoe due diligence for this reason alone.

Of course, if you are correct - you have done your students a favour.

The stakes are high indeed.

(btw - for anyone reading this, I actually have no idea any longer whether I am using English or American spelling it's a hybrid...)

 

[HowardCohodas]

So that's just being outright long/short the underlying (depending on whether it's puts or calls), outright short vol and other sundry sensitivities. So, basically, if the mkt moves sharply the wrong way, you're gonna get absolutely hosed on both direction and vol. Obv, you're not gonna get wiped out, but it's not gonna be pretty. I was confused before. If this is all you're doing, H'edge isn't any sort of edge.

Why would I be in trouble in both directions? In one direction, yes. But so far, if I've formed an iron condor, the other side has provided me with many roll opportunities that sometimes not only balance the loss, but overshadow it so that even though I've hit max loss on one side, the IC as a whole has been profitable. That's a bad landing I can walk away from without serious injury.

 

[meanreversion]

In fact, as you write so well and project yourself so well, you will gain people's confidence, possibly to the extent that they decide to forgoe due diligence for this reason alone.

Forgoe? Is that like tomatoe? Must be the American spelling, or at least the J Danforth Quayle spelling.

 

[DionysusToast]

Olde English

I'm as British as 12 pints of lager & a curry

 

[HowardCohodas]

If you are teaching people a method - you still have some responsibility.

If the naysayers on here are correct - you will at some point wipe out. Your students will wipe out too. With the complexities involved, you have to understand that the claim of students having to do due diligence before trading your methods will be a tad hollow when the level of knowledge required to do that due diligence is high.

In fact, as you write so well and project yourself so well, you will gain people's confidence, possibly to the extent that they decide to forgoe due diligence for this reason alone.

Of course, if you are correct - you have done your students a favour.

The stakes are high indeed.

I try to mitigate the possibility of huge losses by spending considerable time teaching how to determine if the method is beginning to fail. This is not only a personal financial responsibility, but I consider it an ethical one to my wife and my students as well.

(btw - for anyone reading this, I actually have no idea any longer whether I am using English or American spelling it's a hybrid...)

I'm used to that sort of thing. My grandparents spoke what we called Yinglish, a combination of Yiddish and English. What came out was frequently hilarious to the grandkids, but I don't think the grandparents got the joke.

 

[meanreversion]

Olde English

I'm as British as 12 pints of lager & a curry

Chicken tikka masala? Classic Indian dish.

 

[DionysusToast]

Chicken tikka masala? Classic Indian dish.

Vindaloo for me... Another Bradford classic...

 

[scose-no-doubt]

My girls mum is half Indian half Chinese and born and raised in Guyana. I get the best crazy a55 carries.

 

[Martinghoul]

Why would I be in trouble in both directions? In one direction, yes. But so far, if I've formed an iron condor, the other side has provided me with many roll opportunities that sometimes not only balance the loss, but overshadow it so that even though I've hit max loss on one side, the IC as a whole has been profitable. That's a bad landing I can walk away from without serious injury.

I think you misunderstand slightly, Howard... I said "both direction and vol", not "both directions". Obviously, you'll only be in trouble if there's a sharp move in one direction, which happens to be the wrong one. If there's a sharp move in the right direction, you're gonna be makin' out like a bandit.

 

[HowardCohodas]

I think you misunderstand slightly, Howard... I said "both direction and vol", not "both directions". Obviously, you'll only be in trouble if there's a sharp move in one direction, which happens to be the wrong one. If there's a sharp move in the right direction, you're gonna be makin' out like a bandit.

Misread on my part, for sure.

However, the point of an Iron Condor is one of the spreads gets in trouble, but the other leads to "makin' out like a bandit" as you say. And you get to do it a number of times for that expiration series.