SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Edit...Andy I did write about this trade last May here.. http://www.elitetrader.com/vb/showthread.php?s=&postid=1126590&highlight=NDX#post1126590
Sure..
My first attempt was in May
5/19
+ 20 NDX Jun 1625
- 20 NDX Jun 1650 calls
debit 8.70
5/26
- 20 NDX Jun 1650
+20 NDX Jun 1675
credit 4.55
Three major mistakes made. 1)Position size too large to begin with should have only been 10 lots. 2) I bought when the vol's were high and sold when vols were lower. 3) I could have salvaged the trade somewhat by closing out the debit spread before expiration or converting to a 40 contract credit spread. What I did was just let it expire...:eek:
Next attempt better:
6/20
+10 NDX 1600 (calls)
- 10 NDX 1625
debit 7.20
6/30
-10 NDX 1625 C
+ 10 NDX 1675 C
credit 8.25
This was a pg fly (notice a 50pt spread in the credit spread) However the trade continued in my favor (NDX went lower in June and early July.
7/6
-10 NDX 1600C
+10 NDX 1650C
credit 6.20
NDX was still tanking so sold another credit spread
July 10/11/&13 covered to release margin...legged out of one for .05 and the other closed for .10
Third attempt was a debit spread
7/14
+10 NDX 1575 (AUG calls)
-10 NDX 1600 C
debit 3.70 (net -$3700)
7/27 (trade wasn't going so well so converted to a credit spread by..
+20 NDX 1600C 1.4
-20 NDX 1575C 3.4
credit 2.0 X 20 ( +4000)
I haven't done any other NDX trades so the net NDX P&L for the year is -$1045 due again to the botched up June spreads.
The key is to anticipate based on your TA or fundamental analysis to begin your debit spread in lower vol's then if/when things go your way to initiate the credit spread and either add contracts (ratio)to the credit spread or perhaps extend it into a pg fly if your so inclined. A more conservative approach would be to sell fewer spreads than you've bought.
Currently I'm working on doing condors and B-fly's on the SPX to act as hedges for the OTM IC's, but you have to have some market cooperation!!! ie one or two down days a month
GL!
Sure..
My first attempt was in May
5/19
+ 20 NDX Jun 1625
- 20 NDX Jun 1650 calls
debit 8.70
5/26
- 20 NDX Jun 1650
+20 NDX Jun 1675
credit 4.55
Three major mistakes made. 1)Position size too large to begin with should have only been 10 lots. 2) I bought when the vol's were high and sold when vols were lower. 3) I could have salvaged the trade somewhat by closing out the debit spread before expiration or converting to a 40 contract credit spread. What I did was just let it expire...:eek:
Next attempt better:
6/20
+10 NDX 1600 (calls)
- 10 NDX 1625
debit 7.20
6/30
-10 NDX 1625 C
+ 10 NDX 1675 C
credit 8.25
This was a pg fly (notice a 50pt spread in the credit spread) However the trade continued in my favor (NDX went lower in June and early July.
7/6
-10 NDX 1600C
+10 NDX 1650C
credit 6.20
NDX was still tanking so sold another credit spread
July 10/11/&13 covered to release margin...legged out of one for .05 and the other closed for .10
Third attempt was a debit spread
7/14
+10 NDX 1575 (AUG calls)
-10 NDX 1600 C
debit 3.70 (net -$3700)
7/27 (trade wasn't going so well so converted to a credit spread by..
+20 NDX 1600C 1.4
-20 NDX 1575C 3.4
credit 2.0 X 20 ( +4000)
I haven't done any other NDX trades so the net NDX P&L for the year is -$1045 due again to the botched up June spreads.
The key is to anticipate based on your TA or fundamental analysis to begin your debit spread in lower vol's then if/when things go your way to initiate the credit spread and either add contracts (ratio)to the credit spread or perhaps extend it into a pg fly if your so inclined. A more conservative approach would be to sell fewer spreads than you've bought.
Currently I'm working on doing condors and B-fly's on the SPX to act as hedges for the OTM IC's, but you have to have some market cooperation!!! ie one or two down days a month
GL!
Well thanks for taking the time! I went through your trades in detail next to a NDX chart. Looks like your strategy here was:
1) Wait for a plunge
2) Wait till the start of a bounce upward and put on a debit call spread
3) When the upward bounce is roughly topping out, put on a credit spread such that there is a net credit.
4) If step 2) misfires (i.e. there is no upward bounce), turn the debit spread into a credit spread.
Hope I've got that right!
The reason I'm looking at NDX is that it seems to be easier to catch large moves (for me) with TA than SPX (where moves are muted anyway). I don't want to initiate credit spreads but catch large moves with debit spreads.
For example, I would have gotten a "get ready to go short" signal on 4/21 and the entry trigger on 5/11. I would have either bought QQQQ puts or NDX debit put spread. I doubt I'd have the guts to pick a bounce over then next few days and initiate a credit spread. Rather I'd add to my debit put spreads. If the initial position on 5/11 proved to be wrong, I'd close the debit spread and take a small loss. Any thoughts would be great!
1) Wait for a plunge
2) Wait till the start of a bounce upward and put on a debit call spread
3) When the upward bounce is roughly topping out, put on a credit spread such that there is a net credit.
4) If step 2) misfires (i.e. there is no upward bounce), turn the debit spread into a credit spread.
Hope I've got that right!
The reason I'm looking at NDX is that it seems to be easier to catch large moves (for me) with TA than SPX (where moves are muted anyway). I don't want to initiate credit spreads but catch large moves with debit spreads.
For example, I would have gotten a "get ready to go short" signal on 4/21 and the entry trigger on 5/11. I would have either bought QQQQ puts or NDX debit put spread. I doubt I'd have the guts to pick a bounce over then next few days and initiate a credit spread. Rather I'd add to my debit put spreads. If the initial position on 5/11 proved to be wrong, I'd close the debit spread and take a small loss. Any thoughts would be great!
Quote from RichardRimes:
Edit...Andy I did write about this trade last May here.. http://www.elitetrader.com/vb/showthread.php?s=&postid=1126590&highlight=NDX#post1126590
Sure..
My first attempt was in May
5/19
+ 20 NDX Jun 1625
- 20 NDX Jun 1650 calls
debit 8.70
5/26
- 20 NDX Jun 1650
+20 NDX Jun 1675
credit 4.55
Three major mistakes made. 1)Position size too large to begin with should have only been 10 lots. 2) I bought when the vol's were high and sold when vols were lower. 3) I could have salvaged the trade somewhat by closing out the debit spread before expiration or converting to a 40 contract credit spread. What I did was just let it expire...:eek:
Next attempt better:
6/20
+10 NDX 1600 (calls)
- 10 NDX 1625
debit 7.20
6/30
-10 NDX 1625 C
+ 10 NDX 1675 C
credit 8.25
This was a pg fly (notice a 50pt spread in the credit spread) However the trade continued in my favor (NDX went lower in June and early July.
7/6
-10 NDX 1600C
+10 NDX 1650C
credit 6.20
NDX was still tanking so sold another credit spread
July 10/11/&13 covered to release margin...legged out of one for .05 and the other closed for .10
Third attempt was a debit spread
7/14
+10 NDX 1575 (AUG calls)
-10 NDX 1600 C
debit 3.70 (net -$3700)
7/27 (trade wasn't going so well so converted to a credit spread by..
+20 NDX 1600C 1.4
-20 NDX 1575C 3.4
credit 2.0 X 20 ( +4000)
I haven't done any other NDX trades so the net NDX P&L for the year is -$1045 due again to the botched up June spreads.
The key is to anticipate based on your TA or fundamental analysis to begin your debit spread in lower vol's then if/when things go your way to initiate the credit spread and either add contracts (ratio)to the credit spread or perhaps extend it into a pg fly if your so inclined. A more conservative approach would be to sell fewer spreads than you've bought.
Currently I'm working on doing condors and B-fly's on the SPX to act as hedges for the OTM IC's, but you have to have some market cooperation!!! ie one or two down days a month
GL!
thats pretty much it...I did expect it to go up and when it didn't turned into a CS. There are several ways to build then to convert it just depends on the swings you get.
a little update on a few diagonals i have been watching since the last leg up.
first price is about one week ago... right after the last run up.
prices are from ToS quotes screen mid price.
prices dropped quite a bit after the drop was established.
last post about these..... :0) i think i am the only one who finds these prices interesting.
----------------------------
spx diag 1370/1350 1.80 puts
1.80
2.50 !!
2.65
3.10 tues
3.30 wed
3.90 friday
4.10 mon at drop time !!
rut diag 770/750 1.55 puts
1.75
2.30 !!
2.35
2.65 tues
2.65 wed
2.85 friday
2.50 mon
at drop time
----------------------
spx diag (sell 1455dec/buy 1475jan) 1.25 calls
0.90
1.10
1.00 tues
1.15 wed
1.35 fri
1.35 sat
1.10 mon
first price is about one week ago... right after the last run up.
prices are from ToS quotes screen mid price.
prices dropped quite a bit after the drop was established.
last post about these..... :0) i think i am the only one who finds these prices interesting.
----------------------------
spx diag 1370/1350 1.80 puts
1.80
2.50 !!
2.65
3.10 tues
3.30 wed
3.90 friday
4.10 mon at drop time !!
rut diag 770/750 1.55 puts
1.75
2.30 !!
2.35
2.65 tues
2.65 wed
2.85 friday
2.50 mon
at drop time----------------------
spx diag (sell 1455dec/buy 1475jan) 1.25 calls
0.90
1.10
1.00 tues
1.15 wed
1.35 fri
1.35 sat
1.10 mon
With VIX up substantially and SPX down about 1.25% I went ahead and put on few more DEC SPX Put spreads at the 1335/1325 strikes.
I think this down spike is foreign money temporarily pulling out to profit take on dollar weakness. I personally expect a lot more foreign and domestic sidelined cash to move in over the next week or two and a run up toward Dec expiration. I don't expect a major correction this month to go counter to the positive mood.
With VIX up I wish we could get a short run up now so I can put on some far OOM call spreads to balance out the Iron Condor to split my risk.
Also there are some important FED meetings and data coming out this week too - should be a fun period with moderate opportunity to churn SPX up and down and surf sentiment.
TS
I think this down spike is foreign money temporarily pulling out to profit take on dollar weakness. I personally expect a lot more foreign and domestic sidelined cash to move in over the next week or two and a run up toward Dec expiration. I don't expect a major correction this month to go counter to the positive mood.
With VIX up I wish we could get a short run up now so I can put on some far OOM call spreads to balance out the Iron Condor to split my risk.
Also there are some important FED meetings and data coming out this week too - should be a fun period with moderate opportunity to churn SPX up and down and surf sentiment.
TS