[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

[RT] spread on ibm



PureBytes Links

Trading Reference Links




<FONT face="Trebuchet MS" 
color=#000080>Hello Dom,
<FONT face="Trebuchet MS" 
color=#000080> 
well 
done! Always glad to see a fellow trader make money. :-)
<FONT face="Trebuchet MS" 
color=#000080> 
In 
my own trading, I frequently sell credit spreads in a more directional type of 
strategy. With all of these short premium positions, like you I 
usually get out the moment there is a reasonable 
profit.
<FONT face="Trebuchet MS" 
color=#000080> 
Best 
regards,
<FONT face="Trebuchet MS" 
color=#000080> 
<FONT face="Trebuchet MS" 
color=#000080>Michael Suesserott
<FONT face="Trebuchet MS" 
color=#000080> 
<BLOCKQUOTE 
style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
  <FONT face=Tahoma 
  size=2>-----Ursprüngliche Nachricht-----Von: Dom 
  [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 28, 2002 
  19:24An: realtraders@xxxxxxxxxxxxxxxBetreff: Re: [RT] 
  spread on ibm
  HI Mike,
     
      Closed today the spread 
  I entered on ibm on 3/14/02. On that date I sold 25 ibm April 
  105 calls and sold 25 ibm April 105 puts for a total credit 
  of         $ 45000.00 ( 9.00 
  )
  Cost of purchase to close 
  was      $ 27500.00 ( 5.50 )
   Profit( exc comm)   
  .                   $ 17500.00 
  ( 3.50 )   
       With profit being 
  at nearly 40% of maximum total potential profit ,with only two weeks in 
  position and three weeks left, Idecided odds were in my favor to close 
  now.
   
  Best regards,
  Dom
   
  <FONT face=Arial 
  size=2>                                        
  <FONT face=Arial 
  size=2>                                           
  
  <FONT face=Arial 
  size=2>                                          
  
  <BLOCKQUOTE 
  style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
    ----- Original Message ----- 
    <DIV 
    style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
    Dom 
    
    To: <A 
    title=realtraders@xxxxxxxxxxxxxxx 
    href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
    
    Sent: Friday, March 15, 2002 11:03 
    AM
    Subject: Re: [RT] spread on ibm
    
    Hello Mike,
         Thanks for doing the 
    further check.
    Dom
          
    <BLOCKQUOTE 
    style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
      ----- Original Message ----- 
      <DIV 
      style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
      <A title=MikeSuesserott@xxxxxxxxxxx 
      href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
      
      To: <A 
      title=realtraders@xxxxxxxxxxxxxxx 
      href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
      
      Sent: Friday, March 15, 2002 8:53 
      AM
      Subject: [RT] spread on ibm
      
      <SPAN 
      class=071164512-15032002>Hi Dom,
      <SPAN 
      class=071164512-15032002> 
      <SPAN 
      class=071164512-15032002>my heart and mind was all set to write 60%, 
      rounded from 59.8 which was the number that OptionVue gave for 
      your short straddle, but my fingers wrote 30, for what reason I know not. 
      Sorry about that. See attached for the probabilities pertaining to your 
      position.
      <SPAN 
      class=071164512-15032002> 
      <SPAN 
      class=071164512-15032002>I would indeed consider a probability of 
      profit of 60% to be OK for this type of trade. Though that number is 
      not cast in concrete, either. For one thing, the probability refers to the 
      current statistical volatility of 32%, and would vary inversely 
      with it. If volatilities were to increase, it would hurt the 
      probability of profit; if they were to collapse, it would benefit it. 
      Furthermore, a probability figure cannot take into account possible 
      adjustments or roll-overs of the straddle. So that number is to be 
      taken with a grain of salt.
      <SPAN 
      class=071164512-15032002><FONT face="Trebuchet MS" 
      color=#000080> 
      <SPAN 
      class=071164512-15032002>Best regards,
      <SPAN 
      class=071164512-15032002> 
      <SPAN 
      class=071164512-15032002>Michael Suesserott
      <SPAN 
      class=071164512-15032002> 
      <SPAN 
      class=071164512-15032002> 
      <SPAN 
      class=071164512-15032002> -----Ursprüngliche 
      Nachricht-----Von: Dom 
      [mailto:domenick@xxxxxxxxxxxx]Gesendet: Friday, March 15, 2002 
      05:28An: realtraders@xxxxxxxxxxxxxxxBetreff: Re: 
      [RT] spread on ibm
      <BLOCKQUOTE 
      style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
        Hi Mike,
          
          This trade selling 25 april ibm 
        105 calls and selling 25 april ibm 105 puts for a gross credit of 
        45,000.00 backed by cash which is collecting approximately 5% in 
        Ginmae , is not set in stone. When I deem appropriate I will 
        sell more puts or calls depending on where ibm is at. 
           The next cycle is for 25 days. 
        In the last 25 days  ibm highest 
        close was 109.28 and the lowest close was 96.38.The beginning profit 
        range (not counting future selling) is 96.00 to 114.00. With possible 
        more selling at around the 110.00 and/or 100.00 areas.will bring 
        the 96.00 lower and the 114 higher. 
           With the highest close in last 
        25 days being 109.28 and the lowest close being 96.38 on ibm , I 
        don't understand how you can get only a 30% profit probability, which 
        you consider good. I think a 30 % profit possibility is low. The 
        trade is done and I know it will be profitable.Option Vue does not 
        agree. Check out option vue by telling it the spread was bought rather 
        than sold. It should come up with 70 %profit probability. The reciprical 
        of 30%. 
         
        Best regards,
        Dom    
        <BLOCKQUOTE 
        style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
          ----- Original Message ----- 
          <DIV 
          style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
          <A title=MikeSuesserott@xxxxxxxxxxx 
          href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
          
          To: <A 
          title=realtraders@xxxxxxxxxxxxxxx 
          href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
          
          Sent: Thursday, March 14, 2002 
          4:32 PM
          Subject: [RT] spread on ibm
          
          <SPAN 
          class=048215020-14032002>Hello Dom,
          <SPAN 
          class=048215020-14032002> 
          <SPAN 
          class=048215020-14032002>I agree that the theoretical range would be 
          101 - 109. Including moderate slippage and commissions, OptionVue 
          gives 101.23 - 108.77. See attached. In the lower left corner you'll 
          find the other numbers, 13% probability of profit  and a 
          mathematical expectation of -0.91 points at current prices. This shows 
          that this "conservative approach" is conservative only in that losses 
          are limited; unfortunately, they are also almost certain (87% 
          probability).
          <SPAN 
          class=048215020-14032002> 
          <SPAN 
          class=048215020-14032002>Dom, the strategy you suggest - the sale 
          of a straddle - is fundamentally sound, and by placing your 
          stops at 96 and 114 you attain a 30% probability of profit at current 
          volatilities, which is OK for that type of trade. The problem was 
          simply that in trying to be extra conservative you suggested 
          "insurance" (the long options); that insurance was so expensive that 
          the position had hardly any chance left to become a 
          winner.
          <SPAN 
          class=048215020-14032002> 
          <SPAN 
          class=048215020-14032002>Best regards,
          <SPAN 
          class=048215020-14032002> 
          <SPAN 
          class=048215020-14032002>Michael Suesserott
          <SPAN 
          class=048215020-14032002> 
          <BLOCKQUOTE 
          style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
            <FONT face=Tahoma 
            size=2>-----Ursprüngliche Nachricht-----Von: Dom 
            [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 
            14, 2002 21:32An: 
            realtraders@xxxxxxxxxxxxxxxBetreff: Re: [RT] spread on 
            ibm
            Hello Mike,
                 
                 I do this as a 
            collar spread. I sell the put and the call. Net credit of 9.00. The 
            profit range for ibm would be between 96.00 to 114.00. I place stops 
            at 96.00 and 114.00. 
                I presented a most 
            conservative approach. With this conservative approach the profit 
            range would be 101 and 109. These figures would be 105.00 strike 
             plus/minus the 4.00 credit=101.00 and 109.00. How did you get 
            102 and 108?  
             
            Best regards, 
            Dom
             
                
                
            <BLOCKQUOTE 
            style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
              ----- Original Message ----- 
              <DIV 
              style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
              <A title=MikeSuesserott@xxxxxxxxxxx 
              href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
              
              To: <A 
              title=realtraders@xxxxxxxxxxxxxxx 
              href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
              
              Sent: Thursday, March 14, 
              2002 2:37 PM
              Subject: [RT] spread on 
              ibm
              
              <FONT face="Trebuchet MS" 
              color=#000080>Hi Dom,
              <SPAN 
              class=541315818-14032002> 
              <SPAN 
              class=541315818-14032002>no offense, I hope, but the trade you 
              suggest here is not very promising, IMHO. The risk/reward of 
              1 to 4 sounds good; however, this is not the correct number by 
              which to evaluate this spread, for the simple reason that the 
              attainment of that profit is very unlikely. <SPAN 
              class=541315818-14032002>Probability calculations bear this out. 
              To wit:
              <SPAN 
              class=541315818-14032002> 
              <SPAN 
              class=541315818-14032002>The range of profitability of this spread 
              is extremely limited - only between, roughly, 102 and 108, 
              which is a very small range for IBM to be in at expiration. If you 
              exit the spread earlier, that range will be even smaller. In 
              consequence, probability of 
              profit is only 13%, and the mathematical expectation of the 
              trade is negative, -0.72 points. Should volatility increase, those 
              numbers will be even worse.
              <SPAN 
              class=541315818-14032002> 
              <FONT face="Trebuchet MS" 
              color=#000080>Why do a trade for which the probabilities are 
              so unfavorable right from the outset?
              <SPAN 
              class=541315818-14032002> 
              <FONT face="Trebuchet MS" 
              color=#000080>Regards,
              <SPAN 
              class=541315818-14032002> 
              <FONT face="Trebuchet MS" 
              color=#000080>Michael Suesserott
              <SPAN 
              class=541315818-14032002> 
              <SPAN 
              class=541315818-14032002> 
              <SPAN 
              class=541315818-14032002> -----Ursprüngliche 
              Nachricht-----Von: Dom 
              [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 
              14, 2002 17:27An: 
              realtraders@xxxxxxxxxxxxxxxBetreff: [RT] Re: spread on 
              ibm
              <BLOCKQUOTE 
              style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
                 
                <BLOCKQUOTE dir=ltr 
                style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
                  ----- Original Message ----- 
                  
                  <DIV 
                  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
                  <A title=domenick@xxxxxxxxxxxx 
                  href="mailto:domenick@xxxxxxxxxxxx";>Dom 
                  To: <A 
                  title=realtraders@xxxxxxxxxxxxxxx 
                  href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
                  
                  Sent: Thursday, March 14, 
                  2002 11:24 AM
                  Subject: spread on 
                  ibm
                  
                  Here is spread that can be done 
                  now with good risk/reward   .
                  sell ibm 105 april put and sell 
                  105 april call. buy the april 100 put and buy the 
                  april 110 call. total credit +4
                  Max. loss -1 max gain 
                  +4 or anywhere in 
                  between.
                   
                  If comfortable using 
                  stops pocket total premium of +9., place stops at 100 and 
                  110. For myself I would use choice.
                  <FONT face=Arial 
              size=2>DomTo 
      unsubscribe from this group, send an email 
      to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour 
      use of Yahoo! Groups is subject to the <A 
      href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service. 
      To unsubscribe from this group, send an email 
    to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour 
    use of Yahoo! Groups is subject to the <A 
    href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service. 
    To 
  unsubscribe from this group, send an email 
  to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour 
  use of Yahoo! Groups is subject to the <A 
  href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service. 







Yahoo! Groups Sponsor


ADVERTISEMENT









To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx





Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.