DB,
"
Legging in admits uncertainty. It confirms a weak trading plan, in my opinion."
Legging in in option spreads is different from "scaling in" in normal equity transactions (buying at 45, 42, 40), which may be what you are thinking of. Here, legging in IS the plan.
When you leg into a spread you are buying the long position on or near its move, if possible. It allows you to take, say, a $5 spread that would cost you $3 if you act "synchronously" and reduce that cost to $1 or $1.50 by acting "a-synchronously." But you pay for the opportunity by sitting there naked with the one leg while waiting for the 2nd leg to develop. If you can successfully close the 2nd leg, you often find that when the trade retraces against what you believe is the main direction (up or down), you can successfully buy back the short position at a profit for a few days only to resell it at the same price a little later. Now you have a chance to accomplish that nice event, which I have in X, a spread at a net credit.
Kb |
