Yes, though I prefer to try and leg into them (directionally) and always be long the spread. E.G. I'd buy the MSFT 100 puts then sell the 95 puts at a later date (assuming MSFT has gone down). Rarely do I manage a pure zero cost, because you need a full 5 point move in a short period, but it can at least reduce the cost of a 5 pt spread 100s vs 95s. As MSFT pops back up so you can choose whether or not to buy back the 95s.... Timing is pretty important and you have to decide at what levels you'd be happy to own a spread. Another even better method I enjoy is, for example, buy the MSFT 100 put.....stock drifts to $95, sell $95 put, AND buy 95 call (approx flat net cost). Minimum return $5 if stock below $100, maximum unlimited if stock above $100. Obviously works just as well playing from the other side.
Taking profits ? Hmm, always tough. Ive learnt many lessons the hard way in the past. I always try and look at absolute $$$ value of profit/loss, unless initial premium $500 or less, in which case you've probably been looking for some serious leverage anyway. $1,000 profit is $1,000 in any language, and I try and remind myself constantly what $1,000 means in the real world. The only problem with this is that greed/fear take over trading decisions too quickly. Unfortunately though $$$ is what we need to live, so in my book there's never any harm taking off a trade that has a profit of 4 figures, unless a trend is blinding. It also depends on my horizon. On the CUBE May 30 calls, Im pretty sure Ill stick with them til close til expiry, even if we were to get a pop in the stock next week (but that's based more on L/Term outlook etc). Percentage returns sometime look good, and 100% in less than a week Ill almost always take. Im sure that what ive said contradicts every known trading rule but there you go....
"Oh Wise One"......?? not sarcasm at all just friendly banter. I appreciate all your comments and opinions.
Seeya |
