The rubber hits the road...

Except that it is Thanks Giving Day in the states and I am not about to switch my cash over to Canadian to start trading Canadian markets for one day...then tomorrow is a half day in the markets. I guess I will take the weekend to mull this over and do something active on Monday or Tuesday.

I funded my Questrade account in order to be able to trade spreads, which includes iron condors even though they are only really two spreads combined Questrade will not treat them as one trade, and I understand why as I may decide to close one side of the trade and that splits them.

I used an EFT to fund the account, I think I placed the order on Tuesday and the cash is there today... that is quick.

Interesting question I did not ask the CSR or the broker the other day. They treat a spread as one trade for the purposes of using a long call to cover a short call to ensure limited risk to them...I expect that I may not be able to close one side of the spread...buy back the short call to reduce some exposure while letting the long call potentially gain value if the stock price is heading higher. The odds of this are unlikely though as a strike difference of 3 or 4 dollars is a substantial move for any index based ETF...which I am likely to be using.

Plan - M

I should have called it Plan - O as it looks like it is turning into a strictly options plan. I honestly don't see buying typical stocks for some time as I concentrate on an income producing cashflow strategy using only options. This puts my chart reading into a new light as I start looking for signs of rangebound stock activity rather than pending strength or weakness.

The biggest gains in a spread trade strategy are when the spread is placed ahead of a move in that direction as the options become more expensive due to the higher probability that the price will go through any particular strike. This also makes the protection more expensive and in order to keep the target reasonably high (greedy?) the spread has to be larger incurring a higher absolute risk value.

This is not an issue on it's own as long as the trade is monitored and closed before losses start to mount.

I need to investigate the mechanics of the spread trade and how Questrade handles and allows certain things.

Next up is to check the liquidity and price structure for the various sector ETFs. I think that diversification might be best accomplished by trading on various sectors with same sized trades in each or only place call spreads on the sectors that are looking like they are weakening while using SPY as an overall main vehicle. I may be able to come up with a scaled method that incorporates the performance relative to each other to weight position sizing appropriate tot he risk of volatility in each sector.

Did someone say "BACK TESTING?". I am glad I decided on Esignal when I wanted to get a chart service back into the mix...much easier to track multiple charts at the same time, especially with dual or wide screens.

Jeff.