Spread trades and Questrade

Now I am ready to start placing spreads and strangles through my Questrade account...except for one factor, I need cash to bring my account up to $5,000 minimum to allow these style of trades...still a far cry from $25,000.

The setup is easy enough. Select a sideways moving stock and pick a range that it looks like it will not break through on the upside OR the downside.

So a stock at $50 I might select the Dec 55 call to sell and the Dec 60 call to buy for protection then run over to the put side and sell the Dec 45 and buy Dec 40. I picked a sample out of the blue and found that the combo would fall something like this:

Protective call: $0.15
Short call: $1.10
Credit the difference as potential profit: $0.95

Short put: $1.60
Protective put: $0.40
Credit the difference as potential profit: $1.20

For a single trade (four option trades) the take home at expiration, December 18th, would be $2.15. Subtract the commissions for the four trades of $10 each, so $40, leaves $175 profit. The commissions are only $10 each as the options are left to expire whereas they would be $20 if the trade were closed by selling/buying the options to close the deal.

The breakdown for varied position sizing would be as follows:

1 contract per leg: $175 net
2 contract per leg: $386 net
3 contract per leg: $597 net
4 contract per leg: $808 net

I checked with Questrade and I need to place the call spread and the put spread as two separate trades. I couldn't see how to do this with the software... I need to do this with the trade desk over the phone, there is no other way at this point. At least the $25 phone order charge does not apply. I did not check to see if limit orders are set, credit/debit targets are used or what... perhaps they only use market orders which would work OK as I can see the quotes live as they place my order and that would be OK, a bit cumbersome though.

Optioneer makes it so easy as they are providing the proprietary software to select and place the strangle orders as one order so it is nice. That may spoil me for using any other broker setup. I do need to fund the Strikepoint account so perhaps I will syphon off some funds that I was going to direct there towards my Questrade margin account as well and get it rolling along.

(a comment about Strikepoint and Optioneer... the commissions are per trade and each trade is a group of 1 each of the calls and puts, 4 trades in total, so placing multiple trades is more expensive on a dollar for dollar return...and the futures contracts tie up $4600 or so per trade. The scale is different and almost not comparable as with Questrade as they charge the commission and only $1 per contract to increase the position size...while the result is not as fancy it is a better return when scaled up to be comparable if the trades are left to expire and not closed early)

While the Optioneer/Strikepoint setup has a performance guarantee my method does not so I will have to seriously consider if I want to do that or not before committing to it. I need to work out the worst case scenario if the Questrade strangle goes awry and determine how bad I want to manage my very own strangles.

Jeff.