Can you be long and short at same time?

[cablemonster]

monster

Assume you feel a particular ticker will be flat to the next exp date (36 days out) and it is trading at 100. You sell a 92 put for a price that is 15% of your margin requirement, and additionally you sell a call at 108 for 15% of your margin requirement. If the ticker closes between 92 and 108 you keep your premium and make 300% annualized ( 365/36*15%*2). Generally, you will make a lot more than 300% annualized since an early exit frequently yields a bigger percent of the premium than the % of time that has passed.

You realized this gain by entering a bullish and bearish option position with expirations at the same date.

You have also hedged your max loss, since one the two positions will always be a winner. Note - I normally do spreads on the bearish side, but naked puts on the bullish side.

If you want to join a team trading this system go to Trading Strategies Forum, High Probability Credit Options.

Drake

Drake

I read Hull 16 years ago. Obv options with different strikes have different prices hence your example is not relevant. I may as well buy tuna sell salmon.

I will decline your offer to join your trading group as I dont like losing money. Tks

 

[barjon]

Ok so price shoots off north and you decide you want to be long again. To do this you have to close the short. You will get spread and slippage costs closing the short just the same as if you had opened a new long. So your ducati thing doesnt hold water.

Eventually you have to close both trades and pay 2 lots of spread when you could have just closed the original trade.

Unfortunately logic is a bitch and doesn't lie.

Well, it's the same question I asked lv, before he got a bit shirty , why are the tactics I suggested worthless?

I know that +1-1=0, I know that I effectively have no definitive position until one of the trades is closed. I know that it's the same as closing off the original trade and opening a new one IF I have an appropriate entry strategy. Maybe by having both positions open I'm talking about an exit strategy (which one to close off) rather than an entry one that would be required if I was making a new trade?

Just things to ponder over

 

[cablemonster]

Well I can give you one. I was short, my broker went down, couldn't access the platform, there was news coming, so I logged into a spreadbet account, and went long. I was both long and short at the same time. That was some benefit.

Other than that, I think people are mad to do it of course. But if this thread is anything to go by, you can't make someone see it. Psychological crutches are quite resistant to logic.

Good example.

 

[Liquid validity]

Well, it's the same question I asked lv, before he got a bit shirty , why are the tactics I suggested worthless?

Increase in costs, thats all.
Shirty? not my intention, I save that for binary threads

 

[barjon]

Increase in costs, thats all.
Shirty? not my intention, I save that for binary threads

ok

off to bed - enjoyed the tussle

nite

 

[Liquid validity]

ok

off to bed - enjoyed the tussle

nite

same here

 

[cablemonster]

Well, it's the same question I asked lv, before he got a bit shirty , why are the tactics I suggested worthless?

I know that +1-1=0, I know that I effectively have no definitive position until one of the trades is closed. I know that it's the same as closing off the original trade and opening a new one IF I have an appropriate entry strategy. Maybe by having both positions open I'm talking about an exit strategy (which one to close off) rather than an entry one that would be required if I was making a new trade?

Just things to ponder over

The tactics are worthless because they cost you the spread slippage commission x 2 for no advantage. Just run through a few examples with 1 point spread and you will see why its worthless. Over time it will cost you money.

 

[the hare]

Told you we'd need a bigger boat

Staggering

 

[cablemonster]

Told you we'd need a bigger boat

Staggering

Quite. I wonder what the % split of T2W members in the following categories is:

1. Unconsciously incompetent
2. Consciously incompetent
3. Consciously competent
4. Unconsciously competent

In a cruel twist trading competently actually requires others to trade incompetently.

 

[graydrake]

Drake

I read Hull 16 years ago. Obv options with different strikes have different prices hence your example is not relevant. I may as well buy tuna sell salmon.

I will decline your offer to join your trading group as I dont like losing money. Tks

sorry, my example is more like selling tuna and selling salmon, you make a shilling or two on both.

it is true that the %'s are unlikely to be exactly the same on both sides as in my example. My primary strategy is to pick the bull side or the bear side, however, many times I have gone on both sides (naked put on bull side and bear call spread on the bear side) and pick up premium on both, when the ticker stays in my range.

Check out the logic of an iron condor trade on your brokers site, or Investpedia, or ...........

I do not want to be argumentative here, but there are millions of iron condor trades done every day, particularly by short term traders who trade weekly options. By definition an iron condor is a bull position on one side, a bear on the other, both with the same expiration.

Again outside my normal strategy, but I have done many diagonals as well, where the bull long is out 3/4 months and the bear short is out 1/2 months - but each have different strikes, generally determined by the delta difference. The plan here is to have the short expire worthless, and enter another next expiration. (this is a description of a bull call diagonal - could do the opposite if your were bearish)

on a diagonal, If the ticker runs up over a short period of time, you make a lot more on your long, than you lose on your short, so you make money. In the event the ticker goes down, you lose money on the long, but a lot less than if you were buying the stock and the loss is off set by profit on the short --- and then you sell another short to begin to make up your loss.

Drake

 

[counter_violent]

Never seen so many trading topics mixed up and rolled into one thread.
Staggering !

Speaking of incompetence, anyone remember Socco's options debacle. He would have benefitted from some Two way market thinking eh ! Even a rolled up weekend copy of the FT couldn't save him.

Oh, hang on, it was all imaginary wasn't it.


First rule of trading. Preserve trading pot.

Never underestimate the psychological difficulties experienced when trading.
In other words, do whatever you have to do, preserve capital and try to make a profit.

 

[tar]

Yeah if you are only scalping fair enough, trend may not even be a factor
at all if you specifically target ranges.

If you do scalp trends, I don't know about you, but I would much rather
scalp the trend direction than counter trend any day of the week.

Even if we have a strong long term trend , we will get correction periods , look at equities for example surely you can scalp by shorting it ...

 

[tar]

Never seen so many trading topics mixed up and rolled into one thread.
Staggering !

Speaking of incompetence, anyone remember Socco's options debacle. He would have benefitted from some Two way market thinking eh ! Even a rolled up weekend copy of the FT couldn't save him.

Oh, hang on, it was all imaginary wasn't it.


First rule of trading. Preserve trading pot.

Never underestimate the psychological difficulties experienced when trading.
In other words, do whatever you have to do, preserve capital and try to make a profit.

Agree , if for some psychological reason this way of trading is benefiting the trader , then so be it , even professionals do engage in some sort of cheating when it comes to trading "insider trading , front running ... etc " , sometimes you have to cheat to make money and here you're cheating yourself which is fine if it is working .....

 

[Liquid validity]

Even if we have a strong long term trend , we will get correction periods , look at equities for example surely you can scalp by shorting it ...

Sounds like you are describing a daily or even weekly trend,
I'd agree that probably isn't much influence.

I was thinking more along the lines of trend on H1 / 800tick.
In that case, you would still prefer to scalp counter trend?
This is getting away from the original point though.

 

[Liquid validity]

First rule of trading. Preserve trading pot.

Never underestimate the psychological difficulties experienced when trading.
In other words, do whatever you have to do, preserve capital and try to make a profit.

Fair enough if its a case of do whatever you have to if it works.
This is surely at odds with preserving capital by not keeping tight
control of costs?

I don't know, maybe costs aren't as big an issue for most people
or they are unaware.
For what I do costs have a significant impact, which is why I can't fathom this thread
Willingly increasing costs just seems bizarre to me...
Wouldn't it be better to work on the psychological aspect that thinks this is of benefit?

 

[Lord Flasheart]

Ive been screaming all along since the start of the thread of how useless it is,and yet we have some established traders saying it may have its use. I will only conceed that its possible to have an emotional effect on you in which case I would use any tool in my box. In order for that to be the case you would need wide stops as news spikes could really kill you doing this.

 

[tar]

Sounds like you are describing a daily or even weekly trend,
I'd agree that probably isn't much influence.
.

Yes that's what i meant . A position long term "buy and hold" , and another account for scalping , in that case i guess it is justified to buy and short at the same time , assuming you are trading same size ...

 

[Lord Flasheart]

Yes that's what i meant . A position long term "buy and hold" , and another account for scalping , in that case i guess it is justified to buy and short at the same time , assuming you are trading same size ...

but one position will still negate the other so still pointless unless for ease of use.

 

[tar]

I was thinking more along the lines of trend on H1 / 800tick.
In that case, you would still prefer to scalp counter trend?
This is getting away from the original point though.

Agree it is not wise to go against the hourly trend even if you are scalping , i came to conclusion that it is better for me to keep a market bias during a day or a week , for example : longs only , or shorts only ...

 

[the hare]

Agree it is not wise to go against the hourly trend even if you are scalping , i came to conclusion that it is better for me to keep a market bias during a day or a week , for example : longs only , or shorts only ...

Yeah, knowing which trend you are trading generally helps

Heavens above, I just posted something useful ! I must stop doing that