SPX Credit Spread Trader

[El OchoCinco]

LOL well it is a credit spread thread

A few short deep ITM SPX straddles at the current prices is a play on the pullback move in the market I expect. At $30 and with a breakeven of 1350 (1320 strike) with 2.5 weeks to expiration and SPX at 1334, it is a controlled risk since it is deep ITM calls. (i.e. if the market sunk to 1300 overnight, it would still be a small loss).

Quote from Maverick74:

Naked straddles? WTF. Didn't this journal start off as in iron condor thread? :eek: :eek: :eek:

 

[LeonPhelps]

Quote from Maverick74:

Naked straddles? WTF. Didn't this journal start off as in iron condor thread? :eek: :eek: :eek:

Only one visitor to this thread should be getting naked and Leon's watching!

 

[Sailing]

Question: What analysis software are you using....

First, your Double Diagonal listed below does not appear to be just a put diagonal... it looks like a call and put... or a Double Diagonal.

Second, since the diagonal is a play on VEGA, ie, you're long VEGA, your exit should be on increasing volatility. So.. collecting .50 was the appropriate move. Contrary to others who play it for THETA... and maybe some DELTA, it is by nature a play on VEGA.

Your exit is and should be based on VEGA as a rule of thumb.

Hope this helps,

M~

Quote from 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

 

[Sailing]

Sorry.... re-read your post... you did mention DD.

 

[Optionieer]

Amen brother

Quote from LeonPhelps:

Only one visitor to this thread should be getting naked and Leon's watching!

 

[Optionieer]

So I should be ok with the short 1360 Oct calls then, with 3 weeks to go.

 

[Heatheranderson]

Murray
-10 SPX OCT 1375 CALL -- $0.75 credit
10 SPX NOV 1400 CALL -- $2.6 Debit
-10 SPX OCT 1225 PUT -- $075 Credit
10 SPX NOV 1250 CALL -- $1.4 Debit
------------------------------------------------------
TOTAL DEBIT: $2.5

If i play the theta and delta, by the end of Oct expiration, i get to keep the OCT credit ($0.75 + $0.75 = $1.5).

If i can sell the NOV CALL and PUT for atleast $1, i will break even, right?.

Quote from Sailing:

Sorry.... re-read your post... you did mention DD.

 

[Sailing]

Correct,

Let's assume the shorts will expire worthless... not matter what the market does.

So, in reality, you're making money on the longs.... and they will increase in value when VEGA increases. You could think of it as selling a short term narrow strangle against a longer term strangle. Your near term strangle is financing the longer term strangle to give you TIME for a VEGA event to occur.

Mo will like the fact that we're disecting this Double Diagonal.

M~


PS. We like to add a few 'TENT' poles (put calendars) along the way during low volatiity periods to help increase return and increase the B.E. window. I recently posted here that we added a 1325 put calendar in the middle of a 1250p/1275p, 1350c/1375c Double Digaonal. The Put Calendar is making some nice extra change right now.

Quote from Heatheranderson:

Murray
-10 SPX OCT 1375 CALL -- $0.75 credit
10 SPX NOV 1400 CALL -- $2.6 Debit
-10 SPX OCT 1225 PUT -- $075 Credit
10 SPX NOV 1250 CALL -- $1.4 Debit
------------------------------------------------------
TOTAL DEBIT: $2.5

If i play the theta and delta, by the end of Oct expiration, i get to keep the OCT credit ($0.75 + $0.75 = $1.5).

If i can sell the NOV CALL and PUT for atleast $1, i will break even, right?.

 

[yip1997]

Quote from Heatheranderson:

Murray
-10 SPX OCT 1375 CALL -- $0.75 credit
10 SPX NOV 1400 CALL -- $2.6 Debit
-10 SPX OCT 1225 PUT -- $075 Credit
10 SPX NOV 1250 CALL -- $1.4 Debit
------------------------------------------------------
TOTAL DEBIT: $2.5

If i play the theta and delta, by the end of Oct expiration, i get to keep the OCT credit ($0.75 + $0.75 = $1.5).

If i can sell the NOV CALL and PUT for atleast $1, i will break even, right?.

Not correct. You need to sell nov call and put for at least $2.5 to break even.

 

[yip1997]

Quote from Sailing:

PS. We like to add a few 'TENT' poles (put calendars) along the way during low volatiity periods to help increase return and increase the B.E. window. I recently posted here that we added a 1325 put calendar in the middle of a 1250p/1275p, 1350c/1375c Double Digaonal. The Put Calendar is making some nice extra change right now. [/B]

Murray,

Just came back from a long vacation, and there are too many pages to catch up with.

I knew you and a member in your club are experiencing wide DD. Any discovery?