Not 50%, not 53%, 55% at minimum.
That’s the number I want out of a spread trade, and I want to spend a minute on it because most people never set one at all.
The clock starts the day you put it on. You have three days to make 30%, and if you get it, take it and go.
Miss that window and the target moves. Now you are shooting for 55%, and it has to be 55%.
That number comes out of the occurrences and being right. I have more track record on these than any other trade at TheoTrade, and after hundreds of them we are right 72% of the time.
The trade is not about being right or wrong, though. It is about the probability first, then the profitability.
I have a Microsoft spread on that I paid $2.20 for back on August 7th. Take $2.20, multiply it by 1.55, and you get $3.41.
So I go route an opposite order at $3.41. Not a day order. Good till canceled.
I don’t give a damn when it fills.
And I only work one contract on it, no matter how many I have, because that order is an alert, not an exit.
The best alert you can get is an execution.
You’ll know from that one fill that price probing is happening and the rest of your size can go. No indicator on your screen tells you that, and a fill does it for free.
Right now that spread is marking around $3.30 against my $3.41 offer. Microsoft probably needs to dip another five or six bucks before I get an easy fill, which is not exactly a given.
A 55% gain in 10 days is damn good, and we’re right on the dance floor for it.
I run through every one of these positions every Friday, winners and dogs, so you can see where each one sits against its number.
If you want to learn the Xs and 0s of this strategy, I created a guide that spells it out in detail.
It’s free, so you have nothing to lose.
To your success,
Don Kaufman
