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2,025 posts
msg #41068
Ignore alf44
2/7/2006 3:45:29 PM


"alf44, my first few plays were directional buys of puts/calls. Since then, I've decided that's not the way to go and I'm using spreads. Selling one high volatility call/put and hedging it against another to limit my loss......

.....alf44, my current trade is a Bear Put Spread, but because the stock has moved so much in the other direction, no amount of time/volatility value is going to offset the direction (however it is helping me from losing my entire butt)."


You say that..."my first few plays were directional buys of puts/calls. Since then, I've decided that's not the way to go and I'm using spreads."

You then go on to say..."my current trade is a Bear Put Spread."

Well, make no mistake (and I'm sure you're aware of this)...a Bear Put Spread IS a DIRECTIONAL PLAY !

It is ALSO a Debit Spread because the purchase of the in-the-money (higher strike) Put Option costs you more than you receive for selling the out-of-the-money (lower strike) Put Option.

So that's two things...DIRECTION and DEBIT that I'm not that thrilled about with this strategy (although it prolly is better than an outright BUY of a Put).

As I said in my previous post..."I like Credit Spreads ! Credit Spreads allow you to have TIME DECAY work FOR you...not AGAINST you !"

They also obviously allow you to COLLECT premium (ie. credit)...not PAY premium (ie. debit) !

At least...COLLECT MORE than you PAY !

Now...I will admit that Bull and Bear Credit Spreads are also "somewhat" DIRECTIONAL...that is to say you should at least have some directional bias before entering the can ALSO make money EVEN IF the underlying stock doesn't move AT ALL !

I like that !

I like that alot !!!



139 posts
msg #41070
Ignore BFreshour
2/7/2006 4:23:20 PM

Thanks alf, this is actually a net credit spread. I sold the 30 PUT, bought the 25 PUT.

I'll continue researching my trades and find better alternatives to pure directional trades (which obviously are bad for your bottom line).

Thanks again.

139 posts
msg #41072
Ignore BFreshour
2/7/2006 4:56:35 PM

Yes, my apologies, it is a Bull Put Spread. ;)

2,025 posts
msg #41071
Ignore alf44
2/7/2006 4:58:33 PM


You said :

"Thanks alf, this is actually a net credit spread. I sold the 30 PUT, bought the 25 PUT."


Well...if THAT is indeed the case...then you were wrong to describe it as a "BEAR Put Spread" you did in your previous post that I responded to !

There is NO WAY that a "BEAR Put Spread" can be a CREDIT SPREAD !

It can't happen !

What you actually least based on what you have NOW just a BULL Put Credit Spread !!!

A BULL PUT Credit Spread is a BULLISH strategy because you profit if the underlying stock price increases...and the Put you Sold expires worthless !!!

I hate to be a stickler for details but hey...the devil IS IN "the details" !!!

Especially with Option Strategies !!!



37 posts
msg #41082
Ignore jacobnbr1
2/8/2006 1:00:52 AM

perhaps bfreshour the system you are using is working fine but the market conditions have changed. i as you know do the same as you do but was on the sidelines after the last trade we did together did not work out. i put that style of trading on hold and started looking for the bottom fishers dream stocks as boooyahooo does and started buying low price stocks and selling 50% after they doubled, this is only a share builder techniqe but pays on rainy days later on in time. i will eventually go back to buy/sell puts but not during questionable market times.

i can relate with where you are now, this is the third time i had to charge the batteries in my account but i have developed a calm mental state that allows me to be fearless, this mental state has made me hold ones during losses but has made the most progress. as the one fellow stated " one looks for other indicators that he normally does not follow to convince himself the trade is right" when this happens and i start looking for other reasons to keep it is when i cut and bail at whatever costs. i have been trading for about a year on the last battery charge and seem to be holding steady to light increase, nothing impressive but surviving and learning...

keep the chin up and miss the input over at the other board.

283 posts
msg #41091
Ignore heypa
2/8/2006 12:24:18 PM

They say that in real estate the primary consideration is "location,location,location"
In stock trading the primary consideration after selection should be account size money management.If your past results seem better qualified to the Al Capp character( joe blfstk } striding up a hillside under a thunder storm then your guidence for money management should be a strict 5% limit for any one position with an absolute limit of two positions.The no limit poker method of all in when the short stack is sometimes spectacular but disaster lurks at first loss.With a position size limit of 5% bankroll you have no stop loss worries since your position size has established your acceptable loss.At this level you should not be tempted to break your trading plan.You should plan to hold the position until it turns against you.Never sell a rising stock or continue to hold a losing one. When you have proved to yourself that you can follow your plan then and only then should you move on to larger positions with more attendent risk. Live long and prosper

187 posts
msg #41138
Ignore markcrisp
2/10/2006 5:05:24 AM

go onthe YAHOO B.B's and see how emotion influneces trading decisions. Most there have no idea how to trade and trade from emotions. If a stock hits their exit they "kid" them-selves" it will come's a buying opportunity. They think if the fundamentals are good the stock MUST go up in the long term.... They find stories, T.A. to support thier "belief" and if you try to point the other side of the story prepared to get flamed and name called.There are no successful traders there. This is how NOT TO TRADE

Trading a $500 account with a SURE way to blow fact you cannot trade successfully with less than $5,000. You "gambled" and lost. no big deal. Learn from it.

187 posts
msg #41139
Ignore markcrisp
2/10/2006 5:10:53 AM

Let's face it if you trade a small portion of your portfolio on one almost don't care about it. It's easy to follow your rules...OK you might not make 10,000% but making 30%,40%,50% would be great for most....much better than losing it all. You can always risk more when you become comfortable and have a little more "play" money to risk.....

RULE NUMER should BE DO NOT LOSE YOUR CAPITAL. Once gone it's gone for good!

I see copmplete newbies rush in where angels fear to tread HOPING to make a killing in the stock market by next week! IF ONLY it was that easy.

745 posts
msg #41140
Ignore maxreturn
2/10/2006 8:58:11 AM said "Anyone care to take a look at FLSH using RSIWRL display and tell me what's gone wrong? I entered the day of the bounce and have been getting hammered ever since."

I know there are many who advocate and may be successful trading falling daggers like FLSH but you have to be extremely nimble and disciplined to do this. Moreover, it is a very short term trade. I could never do this successfully because it's simply not within my comfort zone. I learned a long time ago that my comfort zone was identifying strong/weak stocks on the longer term charts and then waiting for a pullback on the daily charts to position for next anticipated swing up or down. Doing this you have the longer term trend on your side. I also like to watch for retests of significant highs/lows, then wait for MACD divergence confirmation and a bearish/bullish candlestick supported by volume to get long/short.

It feels to me like you may not have done enough self-evaluation in terms of what kind of trading you feel comfortable with. Then once you discover what makes you comfortable, develop entry, exit and money management rules and then backtest, backtest, backtest UNTIL you see that it works over time. Only then put you money at risk. I think it would be worth your while to read a good book on psychology of trading. I personally liked Mark Douglas' book "The Disciplined Trader". Of course, there are many others. Suggest you do a search on this forum. Good luck BFreshour.

187 posts
msg #41148
Ignore markcrisp
2/11/2006 2:27:49 AM

most people will not study money managment and psychology of trading...That's ashame

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