SPX Credit Spread Trader

The ratioed diagonals were on the Call Side only.... as at times, with the appropriate combination of strikes, you can place the Call side of the diagonal on for EVEN.... but you will have margin to account for.

The difference is that to the downside at worse you will break even... but in reality.. there should be some money left in your next month out longs, maybe not much... but somthing.

To the upside... it helps reduce risk... as a ratioed number of shorts moving against you will not hurt you as badly as a full ratio of shorts, with respect to the number of contracts in your long position.

It's more of a risk reducing position.... but of course.. you give up some profit potential should the market stay within your initial parameters.

Hope that Helps...

M~



Quote from blk:

Hello Coach, Murray, Mo and other traders,

I've been trading far OTM SPX credit spreads since Aug '05. Have been profitable (with 2 bad months Oct 05, May 06 - but got away with a minimal hit). I trade credit spreads and if conditions allow, I complete the iron condor. Been a regular reader of this thread and have learnt quite a bit. Thanks to you all.

Been fascinated by the DDs (thanks to Murray) - especially the part where we dont have to worry about black swans. I've paper traded them. Have also tried them on SPX Weeklies (short) Vs the regular monthlies (long).

But somehow, I havent been able to pull the trigger on the SPX (or other) DD's. I'm quite comfortable trading verticals though. Any ideas to overcome this would be greatly appreciated.

Also, Murray, a few months ago, you were discussing ratioed diagonals on the call side (to compensate for the drop in vega when the index rises). Sorry, if I might have missed what happened to that idea. Are you still pursuing it?

Thanks for the help.
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Nice down day to finish the week. And as bonus even my lonely long (YHOO oct25 put credit spread) went up :D

Coach, did you go long ES during the last hour again? The pattern of bidding it up on down days has worked pretty well recently.
 
Can someone tell me why their is more premium attached to ITM Oct SPY calls right now than puts?

For example, with the SPY at approx. 131.5 this afternoon, the 135 puts were selling at 3.6 (a .10 premium) and the 128 calls were at 4.6 (a 1.10 premium to the market). That's a difference of a buck!!

I checked the IV for each instrument as well...the calls were approx 14 and the puts at 12. Does this small difference in IV account for such a large pricing discrepancy between the two? Or is their something else going on here, that as a relatively new options trader I'm missing?

Thanks
 
Not today but at 3:10 PM the ES suddenly jumped 2.50 points and then added another 2 in the next 10 minutes. It has been happening at the last hour of each day lately........

But it was a BEAUTIFUL down week. Now if we could just bleed higher to 1340 over the next week, I will have a home run by Friday in my 1340/1360 diagonal...

Quote from tplast:

Nice down day to finish the week. And as bonus even my lonely long (YHOO oct25 put credit spread) went up :D

Coach, did you go long ES during the last hour again? The pattern of bidding it up on down days has worked pretty well recently.
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Quote from scienter:

Can someone tell me why their is more premium attached to ITM Oct SPY calls right now than puts?

For example, with the SPY at approx. 131.5 this afternoon, the 135 puts were selling at 3.6 (a .10 premium) and the 128 calls were at 4.6 (a 1.10 premium to the market). That's a difference of a buck!!

I checked the IV for each instrument as well...the calls were approx 14 and the puts at 12. Does this small difference in IV account for such a large pricing discrepancy between the two? Or is their something else going on here, that as a relatively new options trader I'm missing?

Thanks
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I think you are looking at the 127 calls or mixing the sep29 expiration witn the oct 20.
 
Quote from tplast:

I think you are looking at the 127 calls or mixing the sep29 expiration witn the oct 20.
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Not the case here...check out the quotes now...the 127 calls are priced at 5.4.....there is an extra dollar premium attached to the spy oct calls v. the puts....and that premium runs deep into the money on these things

Why would the maekt be pricing in extra volatility in the calls and not the puts?
 
Quote from scienter:

Not the case here...check out the quotes now...the 127 calls are priced at 5.4.....there is an extra dollar premium attached to the spy oct calls v. the puts....and that premium runs deep into the money on these things

Why would the maekt be pricing in extra volatility in the calls and not the puts?
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I replied to this on my thread, but basically, look up the Ansbacher Index discussed a while back on this thread. They use the OEX, but the same theory applies to SPY.
 
Quote from Sailing:



The ability to use the haircut margin to offset the risk... really allows the diagonal to increase return/capital dramatically.

It's a whole different approach to investing.... we find ourselves calculating return on capital with little risk vs. return on margin with tremendous risk in a regular reg-T account.
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murray,

i've studied the same math you did but i dont see how you are reducing risk by using haircut. Unless you are referring to blowing up and not covering your obligations to the prop shop, i fail to see the benefit as you put it. If you are that confident in your strat and can afford increased leverage, that is another question but haircut does nothing for reducing risk to your own capital. Perhaps, i misunderstood. Sure, it requires less capital(hence the term haircut) but increasing size the way you put it increases your leverage(to your own capital at hand). Buying more longs in the back month may reduce your haircut requirement as it improves your short gamma risk in the front month but that doesnt mean you are offseting risk to your own capital at hand. :confused:
 
Quote from optioncoach:


For example I have a $270k position that has required only anywhere between $75k and $160K.

I can use SPX, ES, EW, SPY and even OEX/XEO to hedge :)
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But your risk is still 270 large, no? If we have 2 limit down days on the spoos, maverick will be knocking on your door for the rest. :D
 
If Maverick comes calling for a margin call on an OTM call diagonal when the market drops sharply I will sue his ass lol... and win..

think about it ;)

Quote from rallymode:

But your risk is still 270 large, no? If we have 2 limit down days on the spoos, maverick will be knocking on your door for the rest. :D
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