Option Spreads, Credit my Debit Message Board

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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: Richard Nehrboss who wrote (907)	9/17/1999 5:53:00 PM
From: KFE	Read Replies (1) of 2317

Richard, Has anyone been working OEX spreads long enough to quote some statistics regarding performance? For example, Percentage of winning spreads, average $ win, vs average loss Have been trading OEX options and spreads since their listing. Hell, I can remember trading options when there were only calls and no puts. As far as percentage of winning trades and net profit... that would vary greatly depending upon type of spreads being done. Not to mention the skill of the individual involved. The most discussed type of trade on this thread is the deep OTM credit spread with less than one month to expiration (usually <2weeks). Due to the nature of the trade the percentage of winning trades should be at least 75%. Don't let this figure fool you though because the average loss could be much greater than the average gain if you don't have strict stop points. The risk/reward ratio on a 5 pt. spread is usually about 4 to 1 so you could have a 75% win percentage and still lose money if you let your losses run to the maximum. If you have strict stops you should be able to limit your average loss to level with or slightly above your average gain. IMHO the OTM credit spread is probably the best way for the retail investor to play the options market with limited risk. Option market makers and professional option traders (non-retail) generally make their money by trading implied volatility and being delta neutral but I don't believe this type of trading is practical for the retail investor due to transaction costs. Unless someone is posting their trades real time, don't let any ROI numbers that they quote influence any decisions that you may make. Regards, Ken

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