Stock Option Credit Spreads

I am not liking the stock option credit spreads very much right now.

I knew that stocks can be more volatile than an index any day and more sensitive to news fluctuations AND move in ways that are totally inexplicable at times... so why did I think they could work out exactly?

Well, they can. I just need to work on it a bit.

I took two trades based on a service recommendation due to it being suggested to sell a put against a long call. A rather bullish sentiment trade for certain. I placed my credit put spread $2 lower on the chain than the recommended put figuring that at that point it still meets my target and exceeds their suggested lowest possible price.

The price is within striking distance now. I started out being almost 11% lower than the price and today, after three days, I am within 4%. This trade will expire on Jan 15th, a time to go yet. Considering that the recommended expiry was March or so...

Well, I should know by now that forecasts are not necessarily right, or even close sometimes. That is why I set up trades that look good to me. Rather than going in blind I was planning on using the recommendation as a suggested trade idea. I did a few "just place the trade as recommended" for long options trades and have found that to not work out so well. It is partly due to a possible shift in market trend but if I am paying for a service I would expect it to accommodate that shift and at least not lose lots of money.

Speaking of losses I have a number of options expiring today...I will need to go in and calculate those into my P&L over the weekend.

Anyway, total risk is only $540 if the trade goes 100% against me and runs down the protection put. I could close the short put and cash in on any gains in the long put but I always run the risk of second guessing my trade as if the stock does take back off I can compound my losses easily enough. Perhaps today is just a shakedown due to this being the dreaded "Quadruple Witching Day" with all options expiry's happening today.

I will probably drop the stock option idea altogether for a while and concentrate on sector ETFs as I can. That makes life easier. If it does not work out as well as I anticipate then I can always just chuck the capital into Optioneer to add a trade or two capacity.

On the other hand, Optioneer trades are sitting easy. Wider margins here.

Jeff.