SPX Credit Spread Trader

[RichardRimes]

 

[rallymode]

Quote from optioncoach:

Well since I used the 460 and 380 strikes why would the 410 and 490 strikes be relevant ??????

The 410 put 490 call flies would share the same(almost) characteristics with the 380 put 460 call flies that you opened had GOOG been flat on the day. That would give you a more accurate determination of what your risk in the position actually was with a flat open and vol crush vs. what TOS was telling you when you opened it.

 

[bcreech]

Dosent this guy look like he is sitting on the crapper, trying to figure out how to hedge a short?

 

[rdemyan]

Jeff:

Are you still selling naked options on S&P futures? If so, would you mind sharing how they did on the call side this month?

Thanks.

Quote from jeffm:

When you say "2% of margin requirement", are you using the spread width as an estimate of the margin? I.e. if you are looking at a 50 pt SPX spread, you would want a minimum 1pt (2%) credit?

How far OTM would you say your typical put and call are (referring to the short strikes)?

I'm in the same boat this month. I usually wait and put on most of my positions at once. But this month I started scaling into puts starting with the little dip at the first of Oct. All the "buy the dip" folks drove the mkt back up and I only ended up with 1/4 of my usual put size. The profits from puts balanced out the losses from calls and I finished the month with enough profit for a burger and fries.

 

[LeonPhelps]

Quote from optioncoach:

In all serious, doesn't EVERY position have a weak Greek somewhere. It is how you apply the strategy that makes the difference.

You mean there is no such thing as edge?!:eek:

 

[bcreech]

Quote from LeonPhelps:

You mean there is no such thing as edge?!:eek:

Oh there is an edge, its the one that cuts your head off.

 

[El OchoCinco]

According to ToS:

$490 Call Fly is worth a net credit

$410 Put Fly is worth a net credit.

So if the $490 and $410 Flies are a good representation fo what would happen to my position if GOOG went nowhere. There was no crush in the NOV and DEC months so the position did not suffer as much from the vols. But Tos is not perfect

I am even happier about putting it on in the first place.

Quote from rallymode:

The 410 put 490 call flies would share the same(almost) characteristics with the 380 put 460 call flies that you opened had GOOG been flat on the day. That would give you a more accurate determination of what your risk in the position actually was with a flat open and vol crush vs. what TOS was telling you when you opened it.

 

[rallymode]

Quote from optioncoach:

According to ToS:

$490 Call Fly is worth a net credit

$410 Put Fly is worth a net credit.

So if the $490 and $410 Flies are a good representation fo what would happen to my position if GOOG went nowhere. There was no crush in the NOV and DEC months so the position did not suffer as much from the vols. But Tos is not perfect

I am even happier about putting it on in the first place.

Phil, it is a good representation because the position composed of the 490 call fly and the 410 put fly is identical(almost) to the position you had on once we remove the move in spot. The market already modeled(adjusted) the vols/skews for you.

I admit i skipped alot of math classes in high school but if each position is going for a credit now, wouldnt that mean you gotta pay a debit on your way out?? You are not opening it again Phil so that you can get the credit, you are closing it, you gotta pay a debit to whoever is taking the other side. LOL

Feel free to correct me if i am hallucinating and i will stop nitpicking.

 

[El OchoCinco]

Sorry I was typing so fast I left out the obvious. The Call was at a $.35 debit/credit and the Put was at a $0.25 debit/credit. So it was still less than the 1.55 credit received to open. In other words, the debit to close them out was smaller than the debit I took in.

Of course this is ToS so have to take it with a grain of salt. Worst case maybe it was even which is still fine for being wrong.

Quote from rallymode:

Phil, it is a good representation because the position composed of the 490 call fly and the 410 put fly is identical(almost) to the position you had on once we remove the goog move.

Phil, I admit i skipped alot of math classes in high school but if each position is going for a credit now, wouldnt that mean you gotta pay a debit on your way out?? You are not opening it again Phil so that you can get the credit, you are closing it, you gotta pay a debit to whoever is taking the other side. LOL

Feel free to correct me if i am hallucinating and i will stop nitpicking.

 

[rallymode]

Quote from optioncoach:

Sorry I was typing so fast I left out the obvious. The Call was at a $.35 debit/credit and the Put was at a $0.25 debit/credit. So it was still less than the 1.55 credit received to open. In other words, the debit to close them out was smaller than the debit I took in.

Of course this is ToS so have to take it with a grain of salt. Worst case maybe it was even which is still fine for being wrong.

Even? I dont think so, this was no arb Phil.

I am sure you mean you paid 1.55, and not that you actually got a credit at open?

Here is what i am getting at. You paid 1.55, now you gotta pay again on your way out so lets assume you hit the market and dont get good pricing, if those quotes are correct, you will probably lose another 1.50, so that would've been a total of $3 loss on the 4.50 gain you made. Not a bad risk/reward all things considered but quite different than what TOS modeled for you ahead of the event i can bet my right arm on it. My problem with these flies is the fact that your loss isnt limited to the debit you paid for it as one may think intuitively, some tenor skews can tear your PnL to shreds, especially true if you are going to use them on equities. Not the end of the world but something to keep in mind when placing cross month vega bets.