KFE, I legged-into the QQQ credit spread not because I wanted to take advantage of market direction, but because it was the only way I could place the trade online. Getting through to my broker (Preferred) on the phone is getting increasingly difficult - usually a 10-20 minute wait. They have promised that they are hiring more representatives, but it doesn't seem to be happening. I did, however, wait until the market direction was in my favor, (rising) since I had to do the far strike first, since my account isn't approved for naked writing.
I realized the next day what a good deal I got on this spread. I put on an additional spread, a 180-190, and also an OEX spread of 785-795. This was really dumb, because I didn't get as much credit on the 180-190 as I did on the 184-190! Shouldn't have done it.
I had to take the OEX spread out and shoot it today, though, and it looks like I may have to do that with the 180-190 QQQ on Monday morning. The 184-190 is still looking OK.
I am using the same loss rule that you are, and the one that was recommended in the TASC article - limit your loss to your potential gain.
Anyway, I got a lousey price on the short side of the 180-190, and, along with the bid-ask spread, that really hurt.
Your point about being able to trade between the bid-ask spread on a spread order is well-taken. I'm a bit rusty, but I remember that I used to do this in the past. (Before I started trading with Datek and gave-up the ability to trade options. I've only been with Preferred for the past 9 months, and was at Datek for a couple of years before that.)
I think in the future, I will only put on spreads when the market is in non-panic mode. I should have less trouble getting-through to my broker, and should have more of a chance of getting between the spread. My rule on this used to be to try to split the bid-ask spread, and then give them an extra 1/8. (And, of course, enter it as a spread order specifying the net credit.)
Thanks for the tip on the HHH. Problem is, my broker never has QQQ shares to short, so I'm damned sure they won't have HHH's. I have been able to short SPY, though.
BTW, there has been some amazing liquidity in the QQQ options this past week. They are becoming a quite viable option. |
