Analysis Session #1 for June Bull Put Spread

UPDATE TO POST “Joining the Options Counter Culture

1. Nice to have a tutor in thinkorswim software … better to have it be the same guy you drink margaritas at home with.

2. A put spread risks less than just buying calls.

3. I am actually bearish for May and bullish for June.. so now I am looking at two simple spreads.

4. Strikes are kind of tough – but not really. SPY 127/128 for the raging bull. In other words, I feel comfortable with 1250 and think even 1300 on the index so… how about splitting the diff?

5. Timing – well I expect to take it off the week or two (or even three) BEFORE June expiration. And this is where some more analysis is needed…

…. now look at that, except for the margaritas, every other decision here is discretionary and ambiguous. I mean I could take the probabilities produced by the model (and its assumption on what the vol will be) …. but then I would have to BELIEVE that vol… and I don’t actually. Trade lesson #1 from 1994 – “Non-volatility begets volatility”.

The key however is that I have an opinion and I am convicted about it… someone explain to me that those two pillars of successful hedge fund managers are NOT feelings. (Now yes those feelings are based on intellectual analysis which is also based on experience -which has a feeling component to it – and yes I could definitely be wrong… particularly with SEC v. GS in the air!)

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