Vertical Spreads for Aggressive Growth

graemem · Jul 19, 2006

Quote from Neoxx:

Actually, you can enter stop losses on spreads if you need to, just need to be a little more creative about it.

All you need to do is set up a conditional limit order...

On the trade page, in the order entry box click on Rules, and enter your conditions i.e. how you'd like your stop triggered. Then use the expected price tab to work out the price of the spread at your stop price and enter that as the limit order. May have to be a little conservative when placing your limit if you want to ensure a fill in a fast moving market.

If like me, your access to the markets is limited, this is a godsend.

Hope that helps.
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Right... understand...so in effect estimate the price on the underlying that would need to be hit that would incur my max loss on the spread. I guess I would need to be a bit flexible as you suggest what with changes in Imp.volatility that could screw up my price estimate. That would probably impact a move against a BullPut spread more so than with calls I guess.

Thanks for yr advice. Cheers

graemem · Jul 19, 2006

Thanks for yr help. Much appreciated.!

Quote from Cache Landing:

You got it. That is why I prefer ATM spreads on equities. They are much more manageable in terms of adjustments when things get a little crazy. When the short strike is threatened on OTM spreads you are already sitting on a pretty hefty loss. As you said, ATM somewhat remedies this problem and slows the bleeding, sometimes long enough to adjust and come out smelling like a rose.

My only word of advice to people looking to get into ATM spreads is to leave your emotions behind. An ideal situation would be to have split personalities. The first would execute the trades. The second would be able to re-evaluate tickers that the first has already opened positions in, without considering the existing position. Avoiding what I call "revenge trading" or "hold and hope" is key to this game. IOW, as I said in a previous post, THINK AT THE MARGIN.
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Cache Landing · Jul 19, 2006

I was hoping for a rally like this. With any luck this will continue tomorrow so that I can get the bear calls that I was looking at when SPX hit 1280 a bit ago. I'd really like to be able to open AUG positions before the weekend.

Looking for good setups in basic materials also. If anyone finds anything, drop me a line.

Cache Landing · Jul 20, 2006

Today's Action

BTO 2 FDX OCT 110 p @ 3.90

Year to Date P/L

Account Value: $14,049.50

YTD Gross P/L: 4,365.00

YTD Commiss: 556.50

YTD Net P/L: 3,808.50

YTD % P/L: 40.5%

Cache Landing · Jul 20, 2006

Today's Action Cont.

STO 3 GS AUG 145/150 c @ 2.70

Year to Date P/L

Account Value: $14,019.50

YTD Gross P/L: 4,585.00

YTD Commiss: 565.50

YTD Net P/L: 4,019.50

YTD % P/L: 40.2%

I realized that I had hit a wrong button on my spreadsheet a few days ago and the running PnL was about 0.3% too high for the past few days. It wasn't adjusting for the commissions that I was paying. Sorry if there was any confusion. It should be correct now hopefully because I really don't want to search the formulas in my spreadsheet again.

Anyway, I legged into this GS trade this afternoon while chatting with Neoxx. Thanks for the heads up man.

Cache Landing · Jul 20, 2006

Entered a stop on the FDX position because I have already gotten almost 40% return on it today.

yip1997 · Jul 20, 2006

Quote from Cache Landing:

Today's Action

STO 2 OIH AUG 135/140 p @ 2.10

Year to Date P/L

Account Value: $14,049.50

YTD Gross P/L: 4,365.00

YTD Commiss: 553.50

YTD Net P/L: 3,811.50

YTD % P/L: 40.5%

It appears that I could've timed this better, but I'm still pleased with my entry. If I'd waited I'd have gotten about 2.50 for it, but I likely would've waited until it got closer to 130 and then opened the 125/130 spread instead. We'll see how it plays out over the next couple weeks.
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For options, do you normally average down? I have OIH 120 naked puts opened already, and consider writing more puts as I believe OIH should hold well with cruel oil well about $70.

yip1997 · Jul 20, 2006

Quote from Cache Landing:

Today's Action

STO 2 OIH AUG 135/140 p @ 2.10

Year to Date P/L

Account Value: $14,049.50

YTD Gross P/L: 4,365.00

YTD Commiss: 553.50

YTD Net P/L: 3,811.50

YTD % P/L: 40.5%

It appears that I could've timed this better, but I'm still pleased with my entry. If I'd waited I'd have gotten about 2.50 for it, but I likely would've waited until it got closer to 130 and then opened the 125/130 spread instead. We'll see how it plays out over the next couple weeks.
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For options, do you normally average down? I have OIH 120 naked puts opened already, and consider writing more puts as I believe OIH should hold well with cruel oil well about $70.

Cache Landing · Jul 20, 2006

Quote from yip1997:

For options, do you normally average down? I have OIH 120 naked puts opened already, and consider writing more puts as I believe OIH should hold well with cruel oil well about $70.
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I usually don't average down, but in this case I planned for it knowing that there might be a pretty good chance that OIH would fall to 130 which is another point that I had considered opening a bull put. I would be surprised if we see a drop below 130.

Cache Landing · Jul 20, 2006

Today's Action Cont. 2

STC 2 FDX OCT 110 p @ 5.70

Year to Date P/L

Account Value: $14,376.50

YTD Gross P/L: 4,945.00

YTD Commiss: 568.50

YTD Net P/L: 4,376.50

YTD % P/L: 43.8%

I decided to go ahead and capture profits on this one given it is close to the end ofthe day.

Given that I have until OCT and I think the long term trend is down on this, I am still holding some in my trading account. But as for this journal account, I'm closing out the whole position. 46% return is plenty for one day.