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Strategies & Market Trends : Option Spreads, Credit my Debit
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To: ccportfolio who wrote (158)6/23/1998 10:20:00 PM
From: Tom K.  Read Replies (2) of 2317
 
Lynndal, yes, that's the book I have. I was not impressed with the approach. His 9 out of 10 trades is basically a statistical number ala, 2 sigma being 95% of the time.

If you can find the trades he suggests, he feels that statistically you will profit on 9 out of 10.

However, in describing the risks of the system which is using short spreads that are 2 sigma apart, he states "...the short spread trader can lose a significant sum of money because of the inherent leverage involved."

He then says, use "protective trading" but then goes on to say "It is not possible to make a big killing using the strategies of protective trading."

Eventually, he seems to indicate that it is too hard to find the trades he suggests with equities and recommends using index options (also he feels that "... they are much less the risks..."

My assessment is that he's taken an existing option strategy (spreading) and found at what point he could be 90% accurate. The down side is that the one loss can be a killer... and it will come.

Part 2 of your question was have I tried it... the answer is no. I am conservative and do naked PUTs and then covered calls if I get the stock put to me. My objective is cash flow at a defined level so my strategy is particular to that objective. But I enjoy learning how others approach the arena. These threads are a nice place to learn.

Tom
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