Option Traders & Investing

Anyone have success doing SPY spreads?

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I posted on this last week. A diagonal is a combo calendar and verticle spread. When bullish... For SPY, I buy a long call 90 or so days out with a 60 delta. I sell a short 10-15 days out with a delta of approx 30. After a week or so I buy back the short and sell one a week further out. When bearish I do the same with puts. You need volume at least in the hundreds, so SPY works great. If the market moves against you, roll the short down. If the market moves with you extremely quickly, roll the short up so you don't get Delta inverted. When the long Delta gets up around 65 or so, you can roll back to 60. If you start with about 5 longs you will be able to get an extra contract. I use Friday expirations for my shorts, the mid-weeks are a scam. You can think of this like a covered call with 8:1 leverage.

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When I started the spreads sucked, and liquidity for the long was often weak. I've tried it in parallel every year since, but MY results don't improve, even taking fees and taxes into account. Clearly, the math says it should work better, but it doesn't FOR ME. One of those things where customizing a trading plan has to work for the individual. I tought this to a few thousand people when I was retired, and the most successful all modified it. Many maving the long closer to ATM for example.

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Most important piece is having a plan, testing and understanding how to manage. Spreads can work okay IF they’re structured properly. Make sure you understand expectancy and ensure you establish a position that isn’t negatively expectant on the onset. Credit received (must be positive)= width of strikes * probability of ITM I personally rarely use spreads and typically recommend people focus on saving and investing in ETFs (cash secured strangled or covered calls) while you save. Once you have enough capital to trade single options and experience with your trading plan then I’d get going. But I remember starting off with $5K and not wanting to wait which resulted in me taking more risk than I should’ve - luckily I didn’t blow my account up but it was in fact luck.

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Seems like put spreads are appealing (until the market drops of course) If there's a 10 point cushion (or more) the risk doesn't seem too high to be enticing but curious what others think

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I do diagonals on SPY.

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Please elaborate.

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The Nattenberg book is the best pure options book, at least it was 15 years ago. I developed the trade from First Principles. Slight modifications over the past 12 years or so I've been doing this.

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Oops, Vega, not vegan..

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