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I've entered these trades into my spreadsheet. I've also added a couple columns for 1 contract numbers so people can see what the numbers are for 1 contract positions. It will also let people easily scale those numbers in their heads for whatever numbers they want to compare against. I've cut out all the other data thats not for single contract as it is not relevant for what I'm doing here.
These spreads are already up a bit so I hope that they keep going in the right direction over the next couple days. Looking to dump them on Monday at the latest.
On the spreadsheet, the term "1 C" means that those are the numbers for a 1 contract spread.
Someone asked for my spreadsheet so I hope to be posting that over the weekend. I need to remove some of my data before I post it. It's nice to help keep track of your good and bad trades so you can go back and see what the charts looked like when you opened a position.
This is not a big deal, but is the Opened Time on Priceline correct? It's not even 4:48PM out here and I am New York Time. Is that 4:48 AM? I doubt it.
No stops in place. Typically if support is broken then I'll close the trade. Even if it's broken but at another support level I'll not close it - I'll wait a bit to see what it does. If I can't tell by looking at the chart I'll just take the loss. I also typically don't close the trade unless its past the long strike. If it passes the short strike I still wait it out. With the high credit and selling ATM spreads, this does indeed happen. If it goes against you it doesn't hurt that bad like it would if you sold an OTM spread. If those go against you they hurt bad. I'm banking on nailing the direction of the stock over the next week. If one of these goes WAY against me, so what. Even if it went to zero, I wouldn't care that much. The loss is limited and the loss is not that much because of the amount of credit I got up front.
For example, the ISRG trade I just opened. All I would lose would be $301 per contract. Even if the stock went from 530 to 5. Not too bad for one. Now if the entire market went bad on me and they all went south I'd be in a bit of trouble.
Lets say that did happen. You'd lose $1400 per contract. That better be less than 3% or so of your account size, or you're over extending yourself if you know what I mean... ;-) I think of each batch of spreads collectively as one trade for the week. These bullish ones are all one trade in my mind. In a couple days when I open the bear spreads, those collectively will be one trade. It's the averaging that I need and care about. Usually I have 1-3 go bad on me each week and usually end up with about half of what the total profit would have been. Those are the numbers that I look at.
haha, sorry about that. Good catch. The time is 8:48:20! Not 4:48:20. hehe Just a little typo there. Thats why I post the picture from ToS so you can see the exact, real data on the spreads in case I make a mistake in my spreadsheet.
I just saw that on the previous page. Like I said, not a biggie, but I figured I should le you know just for your record keeping purposes. When you look at that a month from now, you would have been "what the heck" and probably figured out it was 8:48 instead of 4:48 anyways.
Heh yeah... You're right. I would have been "WTF?". lol
Since I'm posting I figured I'd update. The spreads opened this morning have made some progress in the right direction but then the market slumped back down near closing. They ended the day still profitable. I'm hoping for a good up day tomorrow and if we get that and some overbought conditions, I'll buy them all back.
I am looking to get into the weeklies and this is an excellent blog you have going. I've traded Option spreads before so I know a ting or two and will be staying plugged in.
I am shock that you trade these things ATM strike price. But I saw that your technical analysis is a big part. Most will trades these far from the strike price and pick up between 25 to 40 cents on the Wednesday or Thursday just before expiration.
I think that trading them ATM will require big enough move to be out of danger because been too close to the price and way the Gama jumps around close to expiration time I get scared. Not to mention that you also trade them for 7-8 days.
knowing these thing and then reading your blog I am thinking that if you trade few strikes OTM by looking to collect 1/2 of the premium that you are currently looking for (like a 25 Delta), this could increase the winning % of trades immensely. The ROI will be lower, but most importantly your risk exposure will be way lower as well. But because you will have less losing trades it will make up for the ROI. This extra wiggle room is the cushion for the 3 out of 10 time that the stock price will violate your tech analysis.
I am not trying to change your plan. I realize that you are open to ideas so I feel good adding my two cents.
Thanks for the post. You're right, I am open to hearing everyone's ideas about things. There are many ways to trade the same thing just as you described. You can't learn from others if you don listen to others views. :-)
When I first got into trading I paid for education through Investools. My coach was awesome and always pounded it in my head to sell ATM spreads but you need to get the direction right. If it goes against you it doesn't hurt as bad and if you're right you get more profit. You get two out of three directions when doing spreads. Up and sideways or down and sideways.
I was doing the whole selling OTM spreads when I started doing weeklies back in March and I was trying to follow a different system for choosing direction. It didn't work so well for me so I just started doing what was comfortable to me and what I knew. At the same time I started doing ATM spreads as well and things have been going ok so far. We will see how I'm doing in six months.
One other thing, yes, my technical analysis is everything to me. No way I could get into even one spread without it. I'm also looking at the overall profit for the week, not one individual trade so that helps keep the emotion down. Also if I take max loss on all spreads for the week it better not be more than ~3% of your total balance. I actually run mine a bit heavy at around 3.2%. That's if every spread took a max loss. If there was a huge disaster tomorrow like the 1987 crash, I'd be at a max loss of 3%. That happens so infrequently. A regular loss week for me is about a 0.5% loss and it takes about 3-4 trades to be closed as losers to get that. That's why it's important to have about 6-10 on every week so you get the averaging thing working in your favor. If I only did 3 and one wet bad that's 33% of my trades.
