OEX and SPX Weekly Options

A

adam772

So I sold a credit spread on tuesday this week on OEX and SPX. THey expire today.

OEX: I sold the 500 call, bought the 505 call. RZBJT and RZBJA are the tickers.

SPX: I sold the 1075 and bought the 1100. tickers are JXBJW and JXBJB


QUESTION: In my ameritrade account, it shows that the OEX options are still trading , and therefore I can cover it If I wanted to.

But the SPX options for some reason do not come up. It just shows, for example, the 1075 call is " bid .45 , ask .45 ". I cant seem to be able to trade it, or get out of the position!

whats the deal???
 
Quote from adam772:

do the SPX weekly options settle AM perhaps? I checked the CBOE website and it seems they settle PM...
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Those SPX weekly options are treated the same as the monthly ones. They settle on the AM price.

They are no longer trading today.

Check the SET - It is 1065.25.

Be very careful about letting your positions go into settlement.

AZD
 
thanks , I just went on the cboe site and saw they settle AM .

When would it make sense to take the position into settlement day (Friday) on these weeklys?? Is it worth it to even do so, or is it wiser to usually just cover them on thursday close to 4 PM??
 
Quote from adam772:

thanks , I just went on the cboe site and saw they settle AM .

When would it make sense to take the position into settlement day (Friday) on these weeklys?? Is it worth it to even do so, or is it wiser to usually just cover them on thursday close to 4 PM??
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Good question.

First, you made out very well with your 1100/1075 call spread. Congrats.

However, because that spread is rather wide (25 points), for all intents and purposes, you were "uncovered" on those 1075 calls all the way up to the 1100 strike. So, if you did 10 contracts, a gap up to 1100+ (and believe me, it can happen!) would have cost you close to $25,000. And that amount could be much higher if you were uncovered.

To try to answer your question, unless your strikes are a lot closer together:

If you have met your profit goal, close it out!

If you have not met your profit goal, close it out!

If the index is close to the short strike, close it out!

If the index is far away from the short strike, close it out!

I guess you can see the theme here, LOL.

I usually don't feel comfortable letting it go into settlement unless the strike is at least 50 points out.

Even then, take a quick look at recent settlement history. Remember that 70+ gap UP into settlement?

AZD
 
i get the point :-) . dont be greedy and go into settlement day to get that last few dollars out of the credit spread.

by the way, do u write credit spreads on the weeklys?? how have u done and whats your strategy if i may ask? thanks!!
 
Quote from adam772:

i get the point :-) . dont be greedy and go into settlement day to get that last few dollars out of the credit spread.

by the way, do u write credit spreads on the weeklys?? how have u done and whats your strategy if i may ask? thanks!!
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Adam,

Exactly.

That settlement number can be unpredictable. Even if the SPX opens up +10, for example, there is no guarantee that the actual SET gap up might not be +25 as it is computed on the opening number on each of the components. Inversely, on the downside, the same is true.

I usually stay away from the weekly options since the liquidity is often low. On the monthly contracts, you can usually come close to filling somewhere near the midpoint of the bid and ask. On the weekly contracts, it has been my experience that this is not usually the case.

My strategy usually consists of spreads, condors, and butterflies. I have done okay but I am always looking to do better. :D

AZD
 
Hey AZD,

thanks for the good advice.

As I have been doing credit spreads awhile, I enjoy the small income, but I have hit a few major bumps..And I want to know, what exactly are the REPAIR STRATEGIES for a credit spread gone wrong??

For example, Around a week or two ago (I forgot what day exactly), I sold the SPY credit spread (expires this coming Friday) . I sold the 108 call and bought the 109 call for a .10 credit, on 100 contracts ($1000). Now SPY has creeped up and is almost at 108.

What are the repair strategies in such a situation ???

thanks
 
Quote from adam772:

Hey AZD,

thanks for the good advice.

As I have been doing credit spreads awhile, I enjoy the small income, but I have hit a few major bumps..And I want to know, what exactly are the REPAIR STRATEGIES for a credit spread gone wrong??

For example, Around a week or two ago (I forgot what day exactly), I sold the SPY credit spread (expires this coming Friday) . I sold the 108 call and bought the 109 call for a .10 credit, on 100 contracts ($1000). Now SPY has creeped up and is almost at 108.

What are the repair strategies in such a situation ???



thanks
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Hi Adam,

I just saw your message.

So you sold the 108 calls and bought the 109 calls for a credit of .10.

Right now, my quotes show the natural for these contracts at .45 (1.02 and .57).

The most you can lose is .90 plus commissions. The bright side is that you didn't sell the 108 calls naked.

I would invite others (i.e. dagnyt and spin) to chime in as they have discussed various repair strategies in great detail in the past.

The bottom line is what do you think?

Do you believe that the SPY (now 108) will continue to advance?
Are you okay with losing the entire .90 if it does?

Among other things you can:

1) Close out the position and take the loss.
2) Buy back SOME of the position to prevent an entire .90 loss.
3) Start buying some SPYs (somewhat riskier move if the SPY then declines.)
4) "Roll" the position into November at the same or higher strike price.

It's your call (pardon the pun). :D

Sometimes the best "repair strategy" is to figure out waaaay in advance all the "what if" scenarios, and decide right then what your move will be if this happens or if that happens. It tends to take your emotions out of the trade.

Keep us posted.

Good luck.

AZD
 
Quote from adam772:

As I have been doing credit spreads awhile, I enjoy the small income, but I have hit a few major bumps..And I want to know, what exactly are the REPAIR STRATEGIES for a credit spread gone wrong??



thanks
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My thoughts

1) Not every position has to be 'repaired.' Sometimes it's best to take the loss and walk away.

2) If you elect to try to fix this position - BE ABSOLUTELY CERTAIN that you like the 'repaired' posiiton and want to own it.

Do not make a repair just to try to salvage the position. You cannot expect to win every time.

3) Agreeing with AZD, the simplest repair is to buy back some or all of your position. Yes, locking in a loss.

4) Other choices include:

a) buying at least one or two of the 108 calls. You do not want to own additional 109 calls (most of the time). other than exiting the trade, this is the best you can do right now.

b) sell a put spread to bring in some cash. I only mention this becasue it is a possibility. IMHO, it's a <i>very bad</i> idea because you can never bring in enough cash and it gives you downside risk when you had none before

Mark
 
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