One week credit spreads

Quote from backflip:

So it seems that a spread with so little time to exp has no room for error, whereas with one 30 days out, there is time for adjustments, or closing out early before exp week?
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And with the premiums so low you probally will end up with a credit of $200.00 on 10 contracts. Maximum risk is the difference between the strikes, could be $5000, minus the $200.00.

One bad trade in 24 and you are back to square one. Minus all the commisions.
 
Quote from backflip:

What about a one week to exp Iron Condor on CME. I put on a virtual trade (very new at this stuff). Opened the JUL 430/420 put for .30 credit and 500/510 call spread for .30 credit. So I figure 6% for the IC with one week and 40 points cushion on either side (CME at 460). Good or no? Any advice is much appreciated as I am here to learn from everyone's wisdom.
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FWIW, I've been selling ic's on CME for 8 stright months now. This has been my bread and butter play, it's been profitable each month. I typically write a little over 1 sigma(standard deviation) in either direction 30 to 35 days to expiry.

I have adjusted twice so far. First, in the beginning of April, when they announced partnership w/nymex for electronic volume the stock gapped up over $40. There were 2 weeks to expiry, so i closed the ic and reopened with 30 contracts instead of 10 the first spread. I made 11% for apr.

The other adjustment came early in the july expiry ic. i did the same and closed today w/ 8% return.

The thing with short gamma is that it will wipe out your account if you do not know how to properly manage your risk, as opposed to long gamma where the risk lies in the premium you paid out only.

IMO, you can be profitable selling premium on CME 1 week to expiry, you just need to be extra vigilant in your risk management and must be nimble enough to close out the spread if it looks like it might start to violate your short strikes.

I closed my jul CME ic today and currently hold a short aug CME 470 straddle, and bot a sept. 460p,480c strangle until monday. If vols stay under 40, i will then buy premium(synth. straddle-long calls short stock on a ratio) into earnings on tuesday. This stock has been my own personal ATM machine this year.

Anyway, good trading to you.
 
Quote from volatilitypimp:



The thing with short gamma is that it will wipe out your account if you do not know how to properly manage your risk, as opposed to long gamma where the risk lies in the premium you paid out only.

IMO, you can be profitable selling premium on CME 1 week to expiry, you just need to be extra vigilant in your risk management and must be nimble enough to close out the spread if it looks like it might start to violate your short strikes.

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I will echo this sentiment. ICs or short verticals must be extremely carefully monitored if held into expiry. Short gamma can explode in your face in a small move. If the short strike is to be approached in expiration week, forget the time remaining and look to close. Too often have I held out in hopes of a stall and got murdered in a upthrust.
 
Quote from backflip:

So it seems that a spread with so little time to exp has no room for error,
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Hence, tantamount to binary bets. You can certainly win with them but it is not a strategy for longevity IMO.


whereas with one 30 days out, there is time for adjustments, or closing out early before exp week?
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Amongst other reasons, ICs with greater time to expiration are a better choice.

MoMoney.
 
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