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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: Jon Tara who wrote (740)	6/6/1999 2:28:00 PM
From: KFE	Respond to of 2317

Jon, <It strikes me (pun intended) that if you go too far OTM, but differences between even a 10-point spread is very small, with a large potential risk> A key to any successful trader is rigid risk management. Your risk is what you let it be. To give you an example (one I don't find particularly attractive) I'll use the Friday OEX closing bid/asked prices. A 685-690 call credit spread could be put on for 1 1/4 credit. Breakeven point of 686 1/4. OEX closed at 672.42. This would give you approximately 220 Dow point cushion before you would reach your breakeven point. If the OEX rallied to 686 prior to expiration I would cover and probably lose about 1 1/4 point (the same amount I stood to gain). I know never is a long time but this is a rule I never break. <Would you consider doing this with something more wild, like IIX? Or is the relatively lower volatility (and greater predictability) of the OEX important?> I prefer the OEX because of the liquidity and narrower bid/asked spread. I actually prefer doing OTM nakeds to credit spreads but I am no longer willing to devote the time necessary to monitor this type of position. Don't want to be lining up a putt and worrying about a position. Remember: Live while your alive. Regards, Ken