BackSpreads vs regular Long Calls/Puts..... - Options on Futures | futures io social day trading
futures io futures trading


BackSpreads vs regular Long Calls/Puts.....
Updated: Views / Replies:538 / 3
Created: by mdsvtr Attachments:2

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

BackSpreads vs regular Long Calls/Puts.....

  #1 (permalink)
Membership Temporarily Revoked
Memphis,TN
 
Futures Experience: Advanced
Platform: ThinkorSwim,FXCM, Ensign Software
Broker/Data: ThinkorSwim, FXCM
Favorite Futures: Futures, Forex, Options
 
mdsvtr's Avatar
 
Posts: 232 since Sep 2010
Thanks: 853 given, 28 received

BackSpreads vs regular Long Calls/Puts.....

So I need some more expierenced Options traders to please way in, and give me your take on if I should even explore Backspreads , and what the positives and negatives are .

The main reason I have just recently sought out the Backspread, was the fact that I am trying to get Long regular Calls and Puts on the higher priced stocks .... I.E. AMZN, NFLX, CMG, GOOG, etc...

I like the fact that you can enter into a Backspread , and get into the trade for virtually no cost ( Debit ) , and even at times, for a Credit
But what I found out in running some analysis in comparing the Backspread to a regular Long Call , against stocks like AMZN, GOOG, CMG, etc. was ..... that I had to change the spreads from the default ( $5 backspread spreads ) to around a $15 - $20 spread , just to be able to get into the trade for virtually " Free "

By having to put on such a wide spread , this leaves the Max Loss to a much bigger Loss that I am comfortable with trading ( even though True .... I could put a stop loss in place to cap myself from only losing an amount that I am comfortable with ).

Also, to put on a Backspread on this high dollar stocks at the default ( $5 ) spread ..... the Debit is anywhere from $15 - $20 , and this is Selling the 1 strike ITM and Buying 2 ATM strikes , with 45 days till expiration

So in comparing the costs as mentioned above ( $15 - $20 ) to put on a backspread in comparing it to buying the same Long Call ATM with 45 days to expiration ...... The Long ATM call costs more ( roughly $20 for AMZN for example )
So the Breakeven point before I would actually start to make a profit , is actually better ( Lower Breakeven Level ) to place the Backspread vs the outright Long Call

Just wanted to get other traders thoughts, ideas and perspectives on the formentioned comparisons please

I just don't want to miss out on trading this High priced stocks via Options, and so I am looking for an Option's strategy(s) that gives me Unlimited Profit potential , and with Limited Downside Loss

Thanks so much - Michael

Also, I have attached 2 screenshots , showing the Numbers behind placing a Backspread on AMZN

Attached Thumbnails
BackSpreads vs regular Long Calls/Puts.....-2015-07-08-18_14_13-amzn-charts-_total_-paper-thinkorswim-build-1876.11-.png   BackSpreads vs regular Long Calls/Puts.....-2015-07-08-18_15_06-amzn-using-advanced-order-s-....1st-trgs-seq-how-set-.png  
Reply With Quote
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Trading Apprentice
Boston, MA
 
Futures Experience: Advanced
Platform: Etrade
Favorite Futures: Equity Volatility
 
Posts: 2 since Jun 2015
Thanks: 0 given, 1 received


I don't fully understand your example, but backspreads are an incredibly complicated way to get long/short delta. YOu have to take views on the speed of the delta (same as with a vanilla call) and you have to take a view on the implied volatility of the position after the move. Having the offsetting delta positions exacerbates the other risk factors: vega and skew.

If you want to get long, just buy stock or buy calls in a size you are comfortable with. Unless you have a clear view on where volatility will reset or a very specific view that the stock will rip (suppose you believe AMZN will go north of 500 or will selloff.

It's certainly not a structure to "get long while spending less money."

Reply With Quote
The following 2 users say Thank You to newwurldmn for this post:
 
  #4 (permalink)
Elite Member
Sydney, Australia
 
Futures Experience: Intermediate
Platform: Sierra Chart, IRESS
Broker/Data: IB, IQFeed
Favorite Futures: ES, SPI, ASX stocks, options
 
Posts: 399 since Jun 2015
Thanks: 169 given, 446 received

Don't fall in to the trap of thinking that options premiums makes a trade free. Many people think that and sell way too much or get too complicated and blow up. Just do it simple, during low vol buy a bull call spread and during high vol sell a bull put. Options pricing is usually pretty spot on with any discrepancy arbd away by mms, there is no free lunch. What u think is free will be completely offset by the risk taken in the long run.

A backspread looks good now but you need a hell of a move to make it profitable, if u think a big move will happen, then straight calls is more profitable. Trying to get in for free just says ur not confident.

Everything is a trade off with options and there is no edge

Straight calls -> get direction and time right
bull call Spreads -> Same as straight calls but you trade premium for having to also getting your target right
back spread -> Same as straight calls but you trade premium for having to get the minimum movement right

Then you haven't even considered the vol environment yet. Don't get too complicated with options unless you got a very specific scenario to play out (in terms of time, target, direction, minimum movement, vol). Unless you can accurately predict more than 2 of those at a time, don't bother.


Last edited by PeakGrowth; July 9th, 2015 at 07:21 PM.
Reply With Quote
The following 3 users say Thank You to PeakGrowth for this post:

Reply



futures io > > > > BackSpreads vs regular Long Calls/Puts.....

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Good ole fashioned .... Buying Long Calls and Puts mdsvtr Options on Futures 6 July 4th, 2015 06:12 PM
Long Call Break-Even Point (Poor Man's Covered Calls) djcline94 Options on Futures 7 December 11th, 2014 07:10 PM
Options / Trying to buy calls and puts? bengoodspeed ThinkOrSwim 5 December 20th, 2013 09:16 AM
combining calls and puts in same spreads jkl112 Options on Futures 2 October 31st, 2013 12:57 AM
Why more activity during regular trading hours mwtzzz Commodities Futures Trading 17 February 11th, 2013 08:45 PM


All times are GMT -4. The time now is 04:17 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-12 in 0.10 seconds with 20 queries on phoenix via your IP 54.163.210.170