SPX Credit Spread Trader

Quote from optioncoach:


I do not consider an adjustment or move until the index is about 10 to 15 points from my short strike. At that point I will decide whether to push the strikes out further or cut my losses. Since I already have booked a lot of profits for June, I can just cut my losses and get out of the position with a small loss and still have good positive returns for the month. This is one reason I like to book as many profits as the market will give me so that if I have to give one back to the market I am still net positive for the month.

Phil [/B]
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Hi Phil,

If you do not cover until the index is about 10 to 15 points from your sold strike, would you be taking more than a small loss? How many points do you think the 1150/1165 Put spread will be at that time? Do you have a rule where you cover at, say, not more than 2 or 3 times what premium you have sold?

Thanks.
 
Coach,
I began my SPX credit trades yesterday with
ONE 1150 / 1155 put spread for .30 credit.

Getting decent legging in fills using IB was a bitch.
Everytime you change your order price, it is considered
a cancel / replace order with $1.20 charge.

I think that I got charged about 7 bucks plus 2 bucks commish.
So the $30 credit nets to about $20.
That would be about 20 / 500 .. or a 4% return.

I'm wondering if SPY would be better:
SPX 1150 / 1160 put spread .85 credit
SPY 115 / 116 put spread .1x10 = 1.00 credit

Let's pray for a bounce next week!

-esu2
 
I don't want to hijack OC's thread because it's a good one and I want to encourage it to continue.

But I thought I would offer the following on the virtues of NDX and other multiple listed products verses the proprietary products like the SPX.

First, I trade the SPX all the time and I do so to get the exposure to a broader market. But there's no question that it is a pain the arse product to trade.

I also trade the NDX (among other things like the IWM). With it being traded on multiple exchanges, like the ISE, and with the advent of the new $5 strikes instead of $25 strikes, it is in my opinion becoming a superior product to trade.

I legged into a July NDX 1575/1600 - 1450/1425 condor yesterday at a net credit of $3.90 with 18 days left (on Monday). The only reason I got such a great net credit is because as the market bounced around a bit I was filled on the bid and/or the offer all day. All orders when in on the ISE .......all four legs and 16-20 fills throughout the day.

This type of "price non-impact" is virtually impossible on the proprietary products such as the SPX.

Just FYI

Best,
Dr. Z
 
Dr. Z

Why don't you start a similiar thread dedicated to NDX trading. I'm sure there would be great interest in it and it would be great to compare the products and styles of the traders -- as well as avoid overburdening this thread.

Sam
 
If the index is 10 to 15 points away from my short strike, it more often than not, took some time to get there so time decay works in conjunction with delta. Therefore, the position would not explode in value. Remember that my long puts would also increase in value so the spread would not widen so quickly. Moreover, if I choose to push the strikes out, I can do so for a small debit or for free at times. Assuming a $0.50 credit to begin with, I can roll the strikes further out for perhaps a debit of $0.30. Then I take the profit on the call sides if it exists and roll that down for more credit. If there was not call side, then I sell a call side to take in credit. The point is to push off the loss and keep a small credit or at worst take a small loss. This event will happen rarely so taking a small loss in one position is manageable and you will still have good returns.

THe key is to stay on top of it and keep those strikes away. That is why I only go one month out so time decay helps keep it manageable.

The only time I can get hurt is a major move, but I still can push the strikes out and move in front of the market. Even after 9/11 the market quickly paused after a week or so of movement and once you survive that once in a blue moon event with a small loss, you can then work each month as before.

It is all risk management. Keeping the strikes moving and tkaing credit on the other side of a major move is the best way to stay on top of it. If I walk away with just a small loss for the month then I did my risk management job.

It is not easy by any stretch of the imagination and takes a lot of cojones to stay on top of it.

Regards,

Phil


Quote from LoosenUp:

Hi Phil,

If you do not cover until the index is about 10 to 15 points from your sold strike, would you be taking more than a small loss? How many points do you think the 1150/1165 Put spread will be at that time? Do you have a rule where you cover at, say, not more than 2 or 3 times what premium you have sold?

Thanks.
More...
 
I think it is a great idea. Not that I mind your comments but I do not want the topic to get pulled of course. Comparisons of different styles is how we learn new approaches.

Regards,

Phil

Quote from ssternlight:

Dr. Z

Why don't you start a similiar thread dedicated to NDX trading. I'm sure there would be great interest in it and it would be great to compare the products and styles of the traders -- as well as avoid overburdening this thread.

Sam
More...
 
Added a partial hedge with about 3 weeks left to expiration.

Bought 50 JULY SPY 118/117 Bear Put Spreads @ $0.30

Debit = $1,500.

Since my highest put strikes open now is 1150/1165, I want to have some profit cushion in case the index keeps falling as it is today (1189).

The max profit on the SPY spread is $3,500 with SPX at around 1170 or so at expiration or sooner if it moves ITM. I can use this profit to offset somewhat the cost of rolling the strikes out further or even closing and taking the loss.

Since I already have collected a large amount of premium in July I can take a small loss now to get out and still have a good month. This is one reason I try and book as many credits as I can early to give me a nice cushion in case I need it with later positions. Since later positions have had more time decay, I usually go closer with my strikes and therefore the cushion lets me close out calmer.

Also the SPY bear play lets me also make some money if the market dips to redcue any negative effects of an adjustment.

The key is always risk management and to have net credits at the end of each month. Also, the key is to not get complacent and make adjustments or place hedges early so that you can keep emotions out of it as best as possible.

So we shall see what happens this week. Best thing is that July 1st is on a Friday so we only get two weeks in July until expiration.

Phil
 
Nice uptick today so I added a new July call spread position:

Sold 120 JULY 1235/1240 Call Spreads @ $0.30

Credit = $3,600
Margin = $60,000
Return on Margin = 6%

Nice holiday weekend coming up to drain some theta out of my posiitons.

Other CURRENT POSITIONS:

60 July 1125/1140 Put Spreads @ $0.50

55 July 1150/1165 Put Spreads @ $0.50

June is coming to an end and will update final total profit for the month by Thursday.

Phil
 
June has come to an end and I wanted to post the net profit spreadsheet for the month. June ws a great month for OTM Credit Spreads on the SPX. The reason? The SPX opened June at around 1191 and closed today at........ yup 1191.

A perfect sideways market for the month to collect premium.

Below is the spreadsheet downloaded from OptionsXpress which shows each individual position and net profit after commissions and total profit for the month.

With margin used from $100K to $250K for the month (did not go back and calculate average daily margin) the returns can be viewed as from 6 - 11% for the month. June was a great month given the sideways movement and I in no way wish to imply I can make such high returns each month but certainly 3-5% is attainable.

I do not want people to focus on the number of contracts or margin I am using. It is scalable. What I am doing with 60 contracts you can do with 20 or with 2,000.

Next week, we move into August positions and will take profits on my final July positions.

Have a good holiday. Sorry to see June go...

Phil
 

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Quote from optioncoach:

June has come to an end and I wanted to post the net profit spreadsheet for the month. June ws a great month for OTM Credit Spreads on the SPX. The reason? The SPX opened June at around 1191 and closed today at........ yup 1191.

A perfect sideways market for the month to collect premium.

Below is the spreadsheet downloaded from OptionsXpress which shows each individual position and net profit after commissions and total profit for the month.

With margin used from $100K to $250K for the month (did not go back and calculate average daily margin) the returns can be viewed as from 6 - 11% for the month. June was a great month given the sideways movement and I in no way wish to imply I can make such high returns each month but certainly 3-5% is attainable.

I do not want people to focus on the number of contracts or margin I am using. It is scalable. What I am doing with 60 contracts you can do with 20 or with 2,000.

Next week, we move into August positions and will take profits on my final July positions.

Have a good holiday. Sorry to see June go...

Phil
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nice work
 
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