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Aggregate Trades

May 21, 2012

When trading credit spreads, do you have a ‘standard’ spread width (defined as the distance between the strikes? Have you considered the merits of using a different spread width?

Many calendar spread traders choose to buy spreads that are several months wide. Do you wonder why they do that or whether it is a better idea than trading single-month spreads?

When choosing to buy a butterfly spread, are you confident when deciding how far the wings should be from the middle strike? Have you thought about paying a higher (or smaller) premium and owning a wider (or more narrow) spread?

Each of these strategies has something in common. Each spread can be an aggregate, or group, trade. In other words, each of the wider positions is really a combination that includes each of the more narrow trades.

Do you know the pros and cons of aggregating trades?

Let’s take a closer look.



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forestgump

NBBO

May 19, 2012

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Trade Execution

May 18, 2012

Satish asks a timely and important question. This is a situation where our brokers should come to our aid, but they either cannot or will not.

Is there any way to find out the current “fill” price for my IC order, without asking anyone?

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This Week’s Trades

May 17, 2012

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The Basics: Managing a Collar Trade

May 17, 2012

I received an the following question from a long-time reader. This dates from about two years ago, but the embedded lessons remain important).

Mark,
I am long SPY at about 121.50 and protected by long September 120 puts. I sold June 122 calls against the position to defray the cost of the long puts. I plan to sell additional calls in July and August to further reduce the cost. However, as SPY drops [it is currently 108], the premium on the 122 and 121 calls is diminishing to almost useless levels.

If I were to sell a lower struck call to collect a higher premium, like 115 or thereabouts, I risk a reversal in the market.

How do you suggest handling this set of circumstances?
CF

Thanks for the question. The discussion allows me to cover more than one of my favorite ‘philosophy of trading’ scenarios.

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The Basics: Considering Naked Put Writing?

May 16, 2012

Responding to a simple request:

Your opinion on selling naked puts. Both pro & con.

Thanks.
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