SPX Credit Spread Trader

[dagnyt]

Quote from andysmith:


It's almost as if the MM knows the direction the market will take for the few weeks after my fill, and won't let me in easily if I'm directionally correct and will fill me quickly if I'm directionally wrong... Any thoughts?

How about something simpler: The MM may fill your order because it's a spread he wants for his own portfolio. Perhaps because he believes you are 'directionally wrong' or perhaps because it may reduce his risk by balancing some greeks in positions he owns. There is also the possibility that your spread, coupled with other orders currently offered allows him to lock in a great price for a box or a jelly roll etc.

Mark

 

[jeffm]

Selling strangles on ES/SP and pulling in 17% before fees in one month has to involve significant risks.

It says so right on the disclosure document

And this is after he said he reduced his leverage! What "adjustment" would he make if the index moves against him?

I obviously can't answer that for him. But the evidence suggests he does have himself under control. The suprise May/June drop spanked alot of put sellers, including the illustrious Victor Neiderhoffer who was down 30% as you mentioned. LJM was down 1.86% for May and up 4.55% for June.

If you're looking for a role model, this guy is certainly a decent choice. The 2006 version, not the 2002 version LOL.

Domestic asked earlier if there is money to be made 3 sigma's out. I have my doubts about 3 sigmas, but LJM is a good example of the rewards (and dangers) that lie 2 sigma away from the market.

 

[El OchoCinco]

MMs do not know the direction of the market nor attempt to manipulate the market until after I placed a hedge...

Quote from andysmith:

Coach,

An observation: I seem to get filled much faster on trades that, over the course of the next 2 to 4 weeks after my fill, turn out to be directionally wrong. Conversely, it takes longer to get filled on trades which turn out to be directionally correct in the weeks to follow.

It's almost as if the MM knows the direction the market will take for the few weeks after my fill, and won't let me in easily if I'm directionally correct and will fill me quickly if I'm directionally wrong... Any thoughts?

 

[Sailing]

Coach,

Although we still have a bit of a cushion to the upside, we're requesting that you consider placing a hedge today....

This mornings VEGA spike was nicely accepted in our Diagonal Positions... but this mid-afternoon rally has erased it in a hurry.

We usually don't ask for directional assistance, but a hedge about now would be appreciated.

M~

Quote from optioncoach:

MMs do not know the direction of the market nor attempt to manipulate the market until after I placed a hedge...

 

[El OchoCinco]

Your wish is my command lol.... well sort of...

I rolled my short 1355 strike up to 1360 for more cushion and less margin requirement. Not really a hedge but scaling down the position slowly....

 

[Heatheranderson]

I bought the following doubal diagonal for $2.5 per contract a few days ago.I sold it yesterday for $3 when volty jumped.My question(it may have already been answered, if so,i apologize) is
with credid spreads the exit strategy is fixed.Just let them expire worthless.
But with digonals, how do we determine when to get out?.

10 SPX OCT 1375 C/NOV 1400
10 SPX OCT 1250 P/NOV 1225

For $ 2.5 Debit

 

[dagnyt]

Quote from Heatheranderson:

But with digonals, how do we determine when to get out?.

The longer you hold the greater your potential return - unless

a) your short strike is threatened

or b) the market runs away from your strikes. This is especially problematic if you paid a debit for the position.

Thus, with diagonals, your intention should be to hold and let time do its thing.

But remember, although theta is your daily ally, it's VEGA that will determine the size of your payday. It's VEGA that tells you how much you collect when you eventually close the position. This is especially true when youa re able to hold until very enar expiration day.

IMHO, if you get a nice sized spike in VEGA, think about taking the nice profit (if it's available) and close. If your short strike is threated and you still have a profit, that's another time to consider closing.

If your short strike is breached - do not pass go, do not waste time - take action and close (or adjust) the position. You might want to open another position at that time, but don't take chances when the short strike is breached.

Mark

 

[LeonPhelps]

Quote from optioncoach:

Your wish is my command lol.... well sort of...

I rolled my short 1355 strike up to 1360 for more cushion and less margin requirement. Not really a hedge but scaling down the position slowly....

not a bad move

 

[riskarb]

SPX out of steam here at 133775 -- looks like a decent short here. NK planning a nuke test. Sold Dec 134700.

 

[El OchoCinco]

lol... short ES at 1345.50.... holding on for late bust lower or else I am out at 1348

Quote from riskarb:

SPX out of steam here at 133775 -- looks like a decent short here. NK planning a nuke test. Sold Dec 134700.