10-16-2019, 07:37 PM
(10-16-2019, 04:48 PM)NilesMike Wrote:(10-16-2019, 12:59 PM)fenders53 Wrote: Almost ready to try the SPX thing Mike. I practiced on something simpler today. Vertical call spread on Deere. Sold the NOV 175s, bought the 180s. Collected $170 net premium. Like taking candy from a baby.OK maybe not, but my downside max risk is $500 if DE goes parabolic. DE is running up on trade war soybean prayers.
Risk is 330 since you collected 170
You're correct of course, but the $170 cash is already in my account so it's down $500 from here if I mess this up.
I am comfortable with the risk reward. To anyone reading this, it only qualifies as anything close to "conservative" if you are very selective. I won't be doing this with a stock that routinely moves 5% in a day. Most of my port is inappropriate because it is boring DGI low beta so that you can't collect a premium that makes the risk reward work. When the market is right I think I will occasionally do put spreads now and then on oversold stocks I intend to purchase at some point. If I get upside down I can transition to my long position and make the best of it. MMM, CAT, HON are future candidates, but at the wrong end of the trading range right now.