By - Soft-Program5942
You could shrink the width of your strikes, but if you lost 25% of your account in 1 trade that's a sizing issue. The chances of you getting 3 bad trades in a row is very high and you'll blow up
That risk is always present. We've had a tremendous bullish run since the Covid bottom. Most bull put spreads would have worked. Made us all look like geniuses.
That's not a situation that will go on forever. In fact, many bears think the jig's up now. I have no opinion on that, just watching closely.
Lately the market has been quite choppy, due to a lot of bad news and market worries. TA is a valuable tool in the toolbox, but it is more informative than predictive. Events trump TA every time. So even when you do your due TA diligence, some timely bad news can wreck your position. I don't know if there's a solution for that.
When things get ugly, you might have to reduce your position sizing, extend the duration of the spread, and/or open the spread farther otm. Or you might just sit things out until the market tells us it's OK to go back in.
I like put credit spread too but you gotta nail the bottom of the range. If you’re wrong better quick and close it.
Overall, I like put credit spread and debit put spread. Don’t like calls spread due to iv.
Good luck to you.
The issue with PCS is the drill team 6. Any news of ukraine drill team 6 sheds $3-$6 on SPY instantly.
Thanks! And agree nailing the bottom is key. Any advice on how I can get better at this?
I mean your guess is as good as mine. I’m still learning.
How much of your entire NAV are you risking per credit spread?
1%? 5% ? 10%? 50%? Always enter with the mind that you're going to hit the max loss, are you ok with it? How long can you last with consecutive losses?
I have stopped doing put credit spreads because the r:r no longer make sense to me. You may be going for very low deltas on your short side, but the r:r is just insane. Picking up pennies in front of steam roller as some people call it.
You could be making 50 wins and 1 max loss absolutely resets everything.
Just my humble opinion, particularly in today's climate where you see faang stocks dumping 20% overnight.
edit: OP so those were bear put debit spreads? Or you meant to say bear call credit spreads?
If you have a 30K account and a 5 wide spread, I would sell 3-4 of them, max.
You simply have to understand how vertical put spreads work. They limit your risk and return. However it's possible to design a vertical spread where you buy and sell ONE contract and lose $10,000.
I can tell from your stem that you sold a very wide put spread for little credit, and unfortunately you let the stock fall too much and didn't close or manage the spread properly and lost a lot of money. Sorry about that.
I'm still learning, but so far, I am limiting the strike spread and the one i sell is .2 delta. I'll play around with different strikes expirations to find a risk/reward that is pretty decent (I have been aiming for 2:1 or better) - and aim for \~3-5 weeks out so theta can work with me. I always start with the technicals to some extent - looking at chart patterns, reading the news, making sure WSB isn't pumping it, etc.. so i want to have a fairly educated reason to pick the ticker before opening a position. AND be ready to roll if you get threatened - I keep using too much capital and forgetting to leave some for making adjustments as needed.
This is what they call "collecting pennies in front of a steamroller".