I got burned, but I dont know why

A

ANCOLL

Dear option traders,

Yesterday (6 sept 07)
I did bull credit spread with SPX weekly sept week 1 on thursday

BUY PUT Sept week one SEP1 1450
SELL PUT Sept week one SEP1 1465
credit $117
The closing index that day was 1478.55


This morning SPX opened at 1475.02

Which mean SPX didnt ever touch 1465, but I really dont understand why in CBOE weekly settlement shows
1458.98
as its weekly settlement price?

Because of this, my trade got exercised with loss $602

Could anyone explain about this?
thanks in advance.

:(
 
You need to learn what settlement is before trading SPX index options. Settlement has noting to do with where index options. SET is derived from the opening of all 500 stocks in the index and they all do not open at 9:30 AM.

Go to CBOE website and look up SPX SET values and description.
 
?........1465 minus 1458.98 equals 6.02 points times 100 dollars per point equals $602 gross loss plus $117 credit equals $485 net loss?
 
SPX and a few other index products settle at the "SOQ" (special opening quotation. )

This is all 500 prices of the S&P 500 stocks, not just the first print of the index.
 
Quote from cvds16:

rather dangerous doing that kind of thing with big numbers coming out.
More...

Agreed, cvds16. Also agree with Coach about knowing how AM Settlement works.

kny 3 :cool:
 
Here is the picture to clearify the trading.

On thursday 6 sept07, SPX index close @ 1478.55
didnt-go-down1.jpg



On the next day, the settlement for SPX from CBOE was announced @1458.96
WHAT THE ????
settlement2.jpg



And my trading is got exercised, but i dont know why...
The opening quote for SPX on the next day was @1478.55
Being-exercised3.jpg



:( :( :(
 
Quote from ANCOLL:

On thursday 6 sept07, SPX index close @ 1478.55

On the next day, the settlement for SPX from CBOE was announced @1458.96
WHAT THE ????


ANCOLL,

Stop whining and listen to Coach and the others trying to explain settlement.

Thurs: 1478.55
Fri SET 1458.96

It is the OPENING PRINT of every component in the S & P 500. If WMT closed Thursday at $43 per share and the opening print was $42.80, that is the number used. It doesn't matter if by the end of the day WMT is $44 or $45, they use 42.80. Take every stock in the SPX and on a big movement day, this happens.
There are times (a few times a year) that the Settlement price for the SPX is not even within the trading range of the day. e.g., WMT opens $42.80, then trades back to $43. Then, IBM opens $117, down $0.25, then moves right back to $117.25. Let's say every other stock in the SPX opened unchanged. The SPX might have had only a $0.10 range, but by using the opening print the SET might be off $0.20.
SPX closed at the end of trading at about 1453.55, with the VIX at 26.75... nevermind.
Did you do this 2 weeks in a row? Listen to Coach, stop trading this until you know how it works. I'm not trying to beat you up, I just hate to see people put on trades & not being aware of what they're doing. Good luck.


kny 3 :cool:
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