To: dealmakr who wrote (826 ) 8/14/1999 2:58:00 PM From: Ron Lambert Read Replies (2) | Respond to
My strategy has evolved considerably in the last year. It started from a reading of Jon Schiller's book "100% Return on Options Strategy" (worth reading). He noted that one could predictably define the range the OEX typically moves in an option month. He did this by keeping track of the last thirteen months of OEX closing data and calculating the cumulative point move to the upside and the cumulative point move to the downside. He then calculated the second standard deviation of the average point moves for the last thirteen months and these numbers are added and subtracted from the closing value of the OEX after options expiration. These numbers became his targets for opening credit spreads. He suggested you open two five point spreads, one call and one put at these targets at market close on the first day of the option month. This worked OK and gave a predictable 7% return. But as I watched the spread values during the month I noticed that I could do much better than 7% just by having patience enough for the OEX to approach these target prices. His method also tended to put me too close to the market and I had to close several trades at breakeven or a loss.
