Comments on: How Wide Should Your Strikes Be In A Credit Spread?

By: Genius

Genius — Mon, 26 Jul 2010 19:10:39 +0000

That is an interesting trading style. I would have to do some testing on it to see if it makes sense over the long term. The problem comes when you have a major drop in a stock. That will not only force you to buy the stock at a high price when it is much lower, but then the premium you will get from the calls will be much lower because the stock price is lower. For example, I did covered calls on LVS a couple years ago (which is about the same as what you are suggesting) and the stock dropped all the way to under $2 (from $17). I was getting like $20 for selling a near month call. Compared to the loss it was peanuts. Thankfully, the stock rallied and is now above when I bought it, but it took two years to get my money back. With your startegy as soon as you get behind in a trade it will take a long time to get back to even

By: Joe Black

Joe Black — Sat, 24 Jul 2010 05:45:33 +0000

This question was asked once before; but, I never saw your
response. What do you think of the following strategy?
I sell slightly “in the money” naked PUTS on ETFs and stocks. If the underlying is assigned to me, I sell slightly
“in the money” covered CALLS. Does this make sense to you?
With a high VIX and a stagnant market, I think I am making
money. I choose expirations approx. 4-8 weeks to maturity.
If the Calls are not assigned to the buyer, I continue to
sell Calls again and again on the same securities I hold.

By: Genius

Genius — Mon, 19 Apr 2010 15:29:37 +0000

The break even would be the price at expiration where you would not make or lose money on the trade. I cover breakevens more in detail in my free email course which you can sign up for on the homepage.

By: David

David — Mon, 19 Apr 2010 04:45:09 +0000

Nice info…
Could you elaborate on “break even” above. How do you calculate this. And what is it’s importance. Or is this listed elsewhere on your website? Thanks

By: Genius

Genius — Thu, 21 Jan 2010 17:05:10 +0000

By Optimal, I mean the one that I feel is the best to trade. It provide good premium and does not require too much in commissions. But that is only on the SPX. Other underlyings (stocks/etfs) have different “optional” differences between strikes. To discover this, you must become familiar with the underlying by trading it for a while.

I have used OptionVue and Optionetics Platinum website for backtesting. They both work, but I liked the Optionvue a little better. But it was the more expensive of the two.

When i backtest, I like to see the graph as I am in the trade. Thinkbank does not have graphs, yet. They may add it soon. Or if they have i don’t know about it.

By: Charles

Charles — Thu, 21 Jan 2010 14:13:14 +0000

Allen,

Can you clarify what you mean by “optimal”?

I am also looking for backtesting softwares, any suggestions besides thinkorswim?