SPX Credit Spread Trader

Here's a link to a web site that is still under construction, but has useful data regarding patterns in the stock market.

Timing the Market
Patterns in American Stock Market Movements


http://www.benbest.com/business/timing.html



Maybe this information will be of use to us in placing trades and refraining from placing spreads in front of a moving train.


EDIT: Here's a fascinating fact from the link:

"In the bull market of 1998 & 1999, the S&P 500 showed a gain of 26.67% & 19.53%, respectively. But without the best 5 trading-days, the returns would be 4.54% & 3.98%. Conversely, for the bear market in the first 10 months of the year 2000, avoiding the 5 worst trading days would reduce the S&P 500 loss from 18.03% to 0.92% [BARRON'S, 5-Nov-2000, page 20]."
 
Quote from jldavid47:

This is why I never trade the SPX unless I'm planning on getting out prior to
expiration. Settlement is a complete crapshoot. I personally prefer the OEX
or the XEO. At least I know where it's going to settle as the market closes!
More...

I've been meaning to check out the XEO for credit spreads. I think after today's SET on the SPX I will be looking things over very closely this weekend and maybe start going the XEO route to minimize surprises. Any things I should watch out for in the XEO? I tend to get out of the SPX before expiration unless I am WAY otm but would like to avoid surprises like today.

ryan
 
We can certainly discuss XEO spreads but XEO has its own problems as well (not a lot of choices when you go 10 or 15 points OTM. Remember that I did do XEO spreads in OCT for profit.

The SET should not dissuade you from trading the SPX. I would never hold a short strike through expiration that is close to the current index value so SET is never a problem. It is quite easy to avoid SET problems, close the spread on THU. The little cost in getting out is nothing compared to the SET whipsaw. I do not think you should fear SET so much as to avoid trading the SPX (sure there are better reasons to avoid SPX lol). SET is a problem easily solved. If you are 10 points within the short strike by THU, close the position.

XEO is welcome but no need to skew the whole thread away from SPX because of SET. SET is an easily avoidable problem and I think the lesson was driven home quite clearly this week! LOL. Sorry for those that took losses but sometimes that makes a lesson stick far better than getting lucky.

I hope all in all NOV was profitable for ya. My initial estimate was a 2.5% return after commissions for my positions closed in NOV. I still have DEC positions open but I doubt I will close them in NOV so that is pretty much my return for the month. Another profitable one (so far) and no complaints here. Looking for nice DEC to close it out with a nice smile. Drinks on me at the end of the year.


I will try and repost my positions frequently so that you do not have to go digging for them constantly. At least each page I will do it. My suggestion is that put your options to show as many posts per page so that it is more like 54 pages of posts not 300+.

Phil
 
Thanks Coach for talking me out of the 570/575 XEO.

Would have lost if I rolled 565/570 to 570/575.
Closing 565/570 was the best choice.

I sold my long Dec. 580 XEO call today (bought as a hedge)

(it had more than doubled.
It could have gone higher, but days to expiration < 30, so I wanted to take the profit and not be greedy).

Profit for this month: 10%
 
I have been reading this thread since long and I dont recall anyone insisting on the danger of the expiration SET before yesterday. And it seems to be a recurrent problem each month with the SPX.

I (we) know about it now but could have read it earlier!

BTW, my ToS broker warned me by e-mail thursday, so I would be lying saying I went through the event without warning.
 
I really think that if you had no understanding of the set and its consequences, you have no business trading this product. Its akin to taking an exam without having read the material!
 
Quote from Extractor:

I really think that if you had no understanding of the set and its consequences, you have no business trading this product. Its akin to taking an exam without having read the material!
More...

There is nothing better than practice to learn !

As I said you can read and study strategies or ideas from the 2180 posts of this journal or others and miss the SET danger, but real life remind it to you rapidly.
 
There was some discussion about the wide possible movements in SET back in JULY when I held a position to expiration that was 10 points or less near the market. The risk may have not been made crystal clear but I remember us talking about the JUNE SET which was 10 points different. If the risks were not made clear than I apologize and hope the point has been driven home. This thread is quite large so good information gets buried easily. Someone suggested a central place for key info and that is not possible in ET but I could repeat important points and my positions regularly so that new and old readers always have that info. Have to remember that what is in my head is not in every one else's head lol.


I never hold to expiration (JULY was once in a blue moon) but SET is always there and as I said can be easily avoided for future trades but not holding any position 10 points or less close to the index on THU, 10 - 15 points you do so at your own risk although 10/11 handle sets are rare but more likely on triple witching expirations.
 
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