OK, finally entered into an OEX credit spread.
Probably way too close to expiration, probably way too close to the current price, and will probably get what I deserve! :)
I bought the October 680 and sold the October 675 this afternoon, for a credit of 2.25.
I'd intended to get 2.50, and the quotes were such that that would have been possible, but I couldn't get Preferred on the phone, and had to leg into it. I lost a quarter in the process...
Anyway, the idea is that this a "line bet". Worst case is probability rules, and I have a 50/50 chance of making or losing an equal amout of money (well, if I'd gotten 2.50 that would be the case!) But I feel the bias is down, so I have a slightly better chance of making money than losing (if I'm right).
I wanted to sell the 675 because it was at-the-money at the time, and thus had the greatest time-value premium.
I only did 2 contracts, so no big whoop either way it goes. I'm going to try doing this every month (puts or calls, depending on how I think the market is likely to go) and will report back, since I know it's a bit different than the out-of-the-money strategy typically used on these.
The notion of going far out-of-the-money and risking a 5 point loss for a potential 1 point gain just has never set well with me, though I suppose that probabilisticly it's probably a better game than at-the-money... But, I figure, if you're in it to sell premium, then, OK, SELL PREMIUM, and that means at-the-money. |
