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Strategies & Market Trends : Option Spreads, Credit my Debit
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To: OX who wrote (911)9/19/1999 11:04:00 PM
From: KFE  Read Replies (2) of 2317
 
OX,

I see the type of OTM box spreads you and others do on this board as being 'efficient' only in sideways moving mkts as well.

I don't think that anyone here is doing box spreads(trading simultaneous call and put spreads with the same strikes).On a five point strike difference- buying both for less than five or selling both for more than five. I wish that this kind of arbitrage was available to us.

You are probably referring to the trade that I posted last week where I did a simultaneous call and put credit spread where the short strikes were forty points apart. If you wanted to categorize this trade I guess you could say that it would be similar to selling a strangle and yes this type of trade would be best in a sideways market. There is a big difference between this trade and covered call writing. This trade was done with only one week until expiration and had a 640 Dow point profit range(320 up and 320 down).

The vast majority of spreads discussed here are deep OTM credit spreads that will be profitable not only in a sideways market but in a market that moves any amount in the direction desired or a less than large amount in the other direction. In fact, the only type of market that it is inefficient in is one that moves strongly against you. Many times credit spreads can be put on where the market has to move several hundred Dow points against you in a short period of time before there would be a loss at expiration.

Regards,

Ken


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