# Credit Spread Myths



## wayneL (11 August 2009)

I did a video... apologies in advance. 

Credit Spread Myths Part 1



Part 2



Part 3


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## Naked shorts (11 August 2009)

Good video


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## nunthewiser (11 August 2009)

WOW !

options is not my bag , never learnt , never attempted .

But i have to say this ......

THANKYOU for the time and effort you have taken on these educational, non self worshipping videos

you truly are an asset to this forum and i hope ppl that are trading/considering following the options path stop and have a good look/listen at what you have laid on a plate for them

cheers

is there an ulterior motive for your genorosity in taking the time to educate or is it a genuine need to clear up misinformation and help your brother man .? .......................sincere question , not being a smartass, just intrested in what makes different ppl tick .

thankyou in advance


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## cutz (11 August 2009)

Good stuff WayneL,

The shortfalls of credit spreads have certainly been highlighted recently with the one way market and the huge drop in vol.

Keep em coming.


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## skyQuake (11 August 2009)

Cheers, nice and informative. You've just cost the Spruiking/Ramping industy a couple of hundred grand 

Goodonya!


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## Sean K (11 August 2009)

Where do I sign up?!!

Nice one Wayne.


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## mazzatelli (11 August 2009)

nunthewiser said:


> is there an ulterior motive for your genorosity in taking the time to educate or is it a genuine need to clear up misinformation and help your brother man .? .......................sincere question , not being a smartass, just intrested in what makes different ppl tick .
> 
> thankyou in advance




He has been posting for ages nun, if there was some evil motive, it would have come to fruition a long time ago.

But then again maybe he is that patient.........

Awesome videos Wayne.
I thought you would have more of an American accent, but sounds South African??? [PS: I know you are in England lol]


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## nunthewiser (11 August 2009)

mazzatelli said:


> He has been posting for ages nun, if there was some evil motive, it would have come to fruition a long time ago.
> 
> But then again maybe he is that patient.........
> 
> ...





nah i didn't mean it like that ........ a few that give help here have a side motive .. sell books , get some ppl on there courses etc etc etc .,it is FREE help but often leads to punters signing up for further knowledge/education/book purchase 


i haven't seen Wayne selling books , courses , anything as yet so intrigued about why he bothers taking the extra time out of his day to genuinely help others ....... I'm actually impressed as what he has produced is not just a quick 5 minute ditty , but a decent in depth helpful aid

definitely not knocking it and my previous post stands as i reckon its great ...just interested is all


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## wayneL (11 August 2009)

Thanks guys, I was just hoping it wasn't too awful 



> I thought you would have more of an American accent, but sounds South African???



Yeah I get that all the time. It's the vowels, I never really acquired the full Aussie vowel sounds... plus my missus is from East Africa, which has an accent which is not unlike SA.

I usually have more of a slur also :alcohol:


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## Largesse (11 August 2009)

Oooooooo Credit spread thread.

Where's matty2.0?


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## sails (12 August 2009)

Good stuff, Wayne and so good to see some of those myths being dispelled!

And so much to catch up on at ASF - especially in the option threads!  I have just logged back in after a few weeks of interruptions which took much, much longer than expected (last visit was 2nd July and 18,923 posts ).  Won't be back to short term trading for a while yet, but hopefully will be able to check into ASF a little more frequently.


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## Grinder (12 August 2009)

Good job on the vid wayne & also the blog. Theres only a few options traders / educators with blogs that I frequent from time to time & yours is one of em. Glad to see you tell like it is & leave out all the BS.


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## theasxgorilla (12 August 2009)

Simply brilliant Wayne.  Double thumbs up on the video format and narration... crystal clear.

Thanks!


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## mazzatelli (14 August 2009)

sails said:


> Good stuff, Wayne and so good to see some of those myths being dispelled!
> 
> And so much to catch up on at ASF - especially in the option threads!  I have just logged back in after a few weeks of interruptions which took much, much longer than expected (last visit was 2nd July and 18,923 posts ).  Won't be back to short term trading for a while yet, but hopefully will be able to check into ASF a little more frequently.




Nice to have you back M!!


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## bryaneasy (29 August 2009)

Great post mate, thanks for the very informative information!


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## caribean (30 August 2009)

Wow, thank you for taking the time to create something so informative, the videos are excellent!


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## Hend0 (2 September 2009)

Thanks wayne for the post - I was just about to jump in and do a couple of put credit spreads the other day too heh but you've opened up some new information that I wasnt aware of - thanks for that.
Currently reading through a few ebooks on options & purchased Mark D. Wolfinger: The Rookie's Guide to Options to get some better understanding of their mechanics.

Cheers,
Hendo


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## wayneL (2 September 2009)

Hend0 said:


> Thanks wayne for the post - I was just about to jump in and do a couple of put credit spreads the other day too heh but you've opened up some new information that I wasnt aware of - thanks for that.
> Currently reading through a few ebooks on options & purchased Mark D. Wolfinger: The Rookie's Guide to Options to get some better understanding of their mechanics.
> 
> Cheers,
> Hendo



Mark is good. He won't lead you astray.


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## builder2818 (6 September 2009)

This is the guys website: http://www.swing-trading-options.com/creditspreads.html

He is trying to sell a lot of affiliate products on there after buttering people up with his trading (mis)information.


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## mazzatelli (17 September 2009)

One of the absolute legends of options trading  has a wiki page

LOL


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## ulaanxuu (18 September 2009)

*Rebuttal*

I am honoured that my small article has been chosen to be so thoroughly analysed and trashed!  A few words in my defense:

1. It would be a mistake to confuse "hype" with "enthusiasm". On my site, I am not selling anything - no e-books, no e-mail lists - nothing.  I do have some affiliate links for which I scatter adverts throughout my pages, along with Google ads. This is no different from any magazine or newspaper who sell advertising to cover costs.  So, I am not trying to "soften" anybody up. My current click-through-rate is about 2%, which means that 98% of people come to my site leave without clicking on any of the links.  I did the site as a bit of a hobby, and to learn about HTML and SEO etc, and the links serve to cover my costs, although they in no way cover the time I put in for the site development.  If you read deeper on my site, you will see that I promote a bunch of free stuff as the basis for my approach - why pay for what you can get for nothing!

2. I am VERY and unapologetically enthusiastic about credit spreads, because I messed with options for several years before finding a system that works for me. I have been consistently and very successful with the technique that I describe on my site, and it works very well for me.  Is it clunky and not too sensitive to the minutae of gamma etc - yes!  But it is VERY simple, and I have a long list of e-mails from people who have done very badly at options because they were gambling and getting bogged down with technical analysis. This simple, clunky technique that I describe has helped them get their confidence back. So, even if the theoretical aspects are not intellectually pleasing to you, that does not detract from the fact that I personally (and others that I have helped!  For FREE!) have found the process successful.

3. The ezines article has its limits. You are only allowed a certain word limit, and to do a complete analysis of credit spreads is impossible.  You would be dumb to judge me on that article! Its purpose is to draw people (and Google) to my site, where I have a very detailed description of exactly how I set up each trade, with every step of technical analysis, and every possible caveat and warning.  Even the page on my site is a cover page for about 6 other pages where I get into the nitty gritty detail and where I have detailed examples of a bunch of trades.  

4. The comments on my "defense" strategy - this is one of the keys to my technique.  Of course, if you let a spread run into negative territory, you lose a bunch of money. However, every real trader knows that you need to have stop loss or exit strategy. Mine is rigid, and is very clearly explained on connected pages.  I never go into negative territory - I always get out before any spread goes ITM, and then I sell another spread. This way, I come out very close to neutral.

5. The number of traders who lose/make money. Thanks for the CBOE stats. My comment was a quote of a "statement" that is frequently bandied around on forums, which is why I started it "It has been said...".  Of course it is not rigid data - it is a quote of a common comment.  Don't take stuff too literally!

So, again, thanks for all the attention, but please go back to my site and dig a little deeper. After that, if you want to start an honest debate instead of just trashing, we can go for it, and I would be happy for the input that would help me fine tune my technique and my site.


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## mazzatelli (18 September 2009)

Trashing? He broke down statements and provided counter arguments - IOW debate


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## wayneL (18 September 2009)

ulaanxuu,

The stage is yours. If you can successfully counter my points in the video, I'll make a new video. I'm all for accuracy and truth.

Perhaps you can start with 90% options expire worthless?


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## sails (19 September 2009)

wayneL said:


> ...Perhaps you can start with 90% options expire worthless?




Yes ulaanxuu, I would like to know too...

Each strike has a put and a call.  So, if the call is ITM, the put will be OTM - so surely there can be no more than 50% expiring worthless...  

I know the "90% expiring worthless" is a common phrase, but how can it possibly exceed 50% based on my preceding paragraph?

Appreciate your response, ulaanxuu...


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