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Interested in feedback

Discussion in 'Options' started by Larry Brogan, Dec 29, 2015.

  1. Larry Brogan

    Larry Brogan Member

    This is my first attempt at any kind of forum so I really don't understand the dynamics. It's probably simple----just an exchange of ideas in order to help each other.
    I trade options and use only one simple strategy, the Vertical Put Spread. I use only one index the SPX and I only trade the weeklys. So far this year I have made
    128 trades with no losing trades. Through last Thursday my ROC is 489.5%. I have 3 trades in place for this week that are looking good so, knock on wood, should finish the year Jan thru Dec with a 100% win and possibly an ROC of 500%+. I feel pretty good about this but I can't help but feel there are some folks out in the option world that may have some cynicism and I would be interested in any feedback. Appreciate
    Larry B
     
  2. tom

    tom Administrator Staff Member

    Welcome Larry!
    Those are great numbers. Congratulations. Do you mind sharing some of the details of your verticals?
     
  3. David Stewart

    David Stewart Well-Known Member

    Sorry Larry, but hard to believe those numbers. My first question is how many lots do you trade? The second question would be what deltas are you selling and how wide are the spreads, and lastly were you in a position on August 24th this year?
    Oh, and also, what percent of the credit do you aim for before closing the trade? Thanks
     
  4. Andrei

    Andrei Well-Known Member

    My first question is how do you measure ROC. Most people following John Locke's strategies use planned capital to measure their returns. For most trades it is $50K for 10 butterflies. In many cases one does not deploy the entire planned capital, but the returns are still measured against the full amount.
    So do you use max exposure for each trade? Margin required? Entire account value? Maximum loss allowed?
    Thanks
     
  5. Larry Brogan

    Larry Brogan Member

    Not at all I would be more than happy to share what I'm doing and answer any questions you might have. Please contact me at my e-mail at
    brogan0830@gmail.com and we'll set a time to talk.
     
  6. Larry Brogan

    Larry Brogan Member

    Andrei, I understand your skepticism. All I do are vertical CREDIT spreads. A real life example would be if I took in say .90 ($90) on a spread I would divide that by the amount of the spread i.e. a spread of 2040/2015. So that would be $90/2500 =3.6% ROC. Actually I believe one could make the case that the calculation could be $90/2410 for 3.75% since the real amount one could lose is $2,500-$90(the credit)= $2,400. I use the first example. I was an investment advisor/registered investment advisor by trade and when I retired I got interested in option trading. Have been doing that on and off for over 10 years and developed?found this strategy about a year ago. I answered more than your question--sorry. Now I am teaching individuals on a one on one basis for no charge. You might ask why am I doing that, the answer is I can and I want to . If you like to talk
    just contact me at brogan0830@gmail.com.
     
  7. Larry Brogan

    Larry Brogan Member

     
  8. Larry Brogan

    Larry Brogan Member

    Did I answer everyone's questions??
     
  9. Larry Brogan

    Larry Brogan Member

    Mistake $2,500-$90 ==2,410---=3.75%ROC
     
  10. Al G.

    Al G. Well-Known Member

    Hello Larry,
    As a follow up to the questions posted by David:
    1. Delta of short put
    2. Width of spread
    3. Do You take the spread to expiration or do you take profits early, if so what % of max gain do you take
    4. What is the max loss that you get out
    5. Typically how many lots do do you trade

    Thanks
     
  11. Timo

    Timo Active Member

    Sounds like a Round Table topic

    Maybe Tom Nunamaker can hook it up?

    This will save you plenty of emails
     
  12. David Stewart

    David Stewart Well-Known Member

    Round table would be nice or one of the trading groups like the 12 noon Tuesday group
     
    Chuck likes this.
  13. David Stewart

    David Stewart Well-Known Member

    Hi Larry, also with all due respect, I don't agree that the lot size is irrelevant at all. Of course the mechanics are the same, but trading is an emotional game. And having a hundred lots on with a day like August 24th is completely different than having a one lot on for example.
     
    Andrei likes this.
  14. Andrei

    Andrei Well-Known Member

    Thank you Larry for your response. However I still have problems with your return calculation. From your calculation, it seems that you let the options expire and thus collect the full premium. It also means that you are likely at some point to take the full loss of $2410. I think, this is a very real possibility with weekly options. It will take you 26 weeks to recover the loss.

    What proportion of the account do you dedicate to the trade? If for instance, your account is $25K thus you may be able to put on 10-lots of the trade, but even 5% (2 SD) risk of the 100% loss would be unacceptable to most people. On the other hand if you trade just one lot and can produce close to $5k in profits which is about 19% return on your account, it may be a very attractive strategy to a lot of people.

    I think Timo's suggestion of having a round table discussion is a good one.
     
  15. David Stewart

    David Stewart Well-Known Member

    Agree Andrei, That's why I mentioned the lot size
     
  16. Larry Brogan

    Larry Brogan Member

    Andrei
    I think thee may be 2 ways to calculate ROC. For example if you had a .90($90) on a $2,500 spread the calc would be 90/2500 for 3.6% of subtract the $90 from $2,500=$2,410 then divide the 90/2410 or 3.75%. I use the former method.
     
  17. Larry Brogan

    Larry Brogan Member

    Dave I would like to address the part of your post regarding the lot size and emotional game. I don't view investing or trading as an "emotional game" but rather as a business. Our emotions need to be minimized as much as humanly possible. In the trading business our emotions left unchecked will almost certainly get us in trouble. If trading 100 contracts makes one very nervous that I would suggest lowering that number down to 75, 50 25, or 1 until emotion is minimized to 0.
    Having said that, I really believe the problem is not so much emotion as position sizing and money management. Also it seems that when we make a trade we need to be emotionally comfortable with it by knowing when(at what point) are we going to make an adjustment and what adjustment are we going to use. I have long felt that many investor/traders walk through the investing door without any idea when they are going to come out. IMHO that can be a fatal flaw. By the way August was my most profitable month and I had to make 2 adjustments. Your thoughts would be welcome and appreciated.
     
  18. Larry Brogan

    Larry Brogan Member

    Andrei, I'm trying to answer the posts as best I can-----don't think I'm doing a very good job of doing it in order. If you will, see my response to Dave below.
    But there is one thing I would like to say about your post of "taking the full loss of $2,410". I can assure you there is no way I can think of where I would let that happen.
    The operative word is "LET". I view trading as a active not passive activity. Way before that trade would ever get to $2,400, as a matter of fact before it gets to the short position I WILL be taking corrective action by making an adjustment. Your thoughts or comments would be appreciated.
     
  19. David Stewart

    David Stewart Well-Known Member

    Larry, I think we were basically saying the same thing. I think we are all interested in taking a look at what you have done and the adjustments, entries, etc for your trading. Why don't we just get you on the noon group on Tuesday or any other time when you are available and we can all take a look at what you are doing. That would be great.
     
  20. Larry Brogan

    Larry Brogan Member

    Have just finished my year end results. There were 131 trades made 131 winners, only 2 times did I have to make an adjustment. Average capital used was
    $1,900 with a ROC(Return On Capital) of 499.2% using the more conservative method of calculating and not subtracting the credit from the spread amount.
    Next year will be a challenge.:)
     

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