LD Lossdog Research
strategy

Defined risk spreads

3 matching records.

Trade idea

Trade idea Defined risk spreads

The speaker suggests that defined risk trades can be used to achieve a 20% return on a $250,000 account without constant monitoring. This approach involves selling premium (e.g., shorting options) and avoiding directional trades with profit caps. The speaker also notes that the VIX being elevated above 20 while IVR is not elevated below 30 may indicate a no-trade condition, as the market is volatile but the individual ticker's implied volatility is not elevated.

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StrategyDefined risk spreads
Time horizonLong-term
Entry / triggerWhen the VIX is elevated above 20 but IVR is not elevated below 30
Target / exit20% return on a $250,000 account over time
Invalidation / stopSignificant market moves that invalidate the trade premise
SpeakerScott
Risks
  • Market volatility
  • Potential for significant losses if the trade premise is invalidated
Defined risk spreadsLong-term
medium confidenceVerify in video at 06:06 ↗
Trade idea

Trade idea defined risk spreads

The speaker suggests that when implied volatility (IV) is low, buying defined risk spreads can be a viable strategy. The question posed is whether it is more effective to buy tighter debit spreads (e.g., $1 or $2 wide) with more contracts or wider spreads (e.g., $5 or $10 wide) with fewer contracts. The reasoning is that tighter spreads may offer more frequent opportunities due to their lower cost, while wider spreads may offer higher potential rewards but with greater risk. The speaker does not provide a definitive answer, leaving the decision to the trader based on risk tolerance and market conditions.

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Strategydefined risk spreads
Entry / triggerwhen IV is low
SpeakerBrett
Risks
  • Market volatility could increase, reducing the effectiveness of the strategy
  • The strategy may not perform as expected if IV rises or if the underlying asset moves significantly
Defined risk spreads
medium confidenceVerify in video at 27:43 ↗
Trade idea

Trade idea defined risk spreads

The research suggests that widening the strikes in defined risk spreads is more effective than adding more contracts. This approach reduces risk and increases the probability of success, supported by mathematical and statistical reasoning. The thesis is based on the idea that widening the strikes provides a higher probability of success and lower risk compared to adding more contracts.

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Strategydefined risk spreads
Time horizonshort-term
Entry / triggerwhen the opportunity to widen the strikes or add contracts is available
Invalidation / stopif the market moves against the spread
SpeakerTom Sausnoff
Risks
  • market movement against the spread
  • limited upside potential
Defined risk spreadsshort-term
high confidenceVerify in video at 27:46 ↗