SPX Credit Spread Trader

[El OchoCinco]

If we break through the support I highlighted in the charts I have attached, I will probably go long some XSP/SPY/SPX put options, depending on which I like and make some money off the the move lower. Pricing 1250 and 125 strikes and looking at verticals (bear put spreads). I would be willing to invest $1k to $2k on puts .

However I expect today's move to be on low volume. Even looking at the ES I am seeing a volume below 300,000 when large price swings usually reach 900,000 for the day so even the futures are trading light.

 

[Synaptic]

The 1250 area as support ?

Quote from optioncoach:

If we break through the support I highlighted in the charts I have attached, I will probably go long some XSP/SPY/SPX put options, depending on which I like and make some money off the the move lower.

 

[El OchoCinco]

If you look at the charts I have been attaching on this page and on the previous page and BELOW you will see the support line I drew which has been holding. Today the SPX pretty much closed right on the line or just below it depending on how you draw it so due to the light volume and the margin for drawing error I would see we are on the cusp.

Tomorrow should really be a dead day but if it drops a lot and closes there, the support might indeed be broken and I will be adding some long puts to profit from the move lower, possible to the 1240 area and below but not sure.

Quote from Synaptic:

The 1250 area as support ?

 

[andysmith]

Murray,

Same thing in CA since we did not use the heat last month. How does it compare to this time last year?

Quote from Sailing:

FYI,

People here in the Northern states, (Michigan), are receiving their natural gas bills.

It's the talk of the town.... most bills are 2.5 to 3.5 times what they were the previous month. For example: our cottage we don't live in, just visit, last month $56, this month $181. Our house, last month $120, this month $399.97

It will be interesting as the month of January continues....

I only comment on this as other bills (X-mas) and continued heat bills, along with Fed rates, and slowing housing.... Hmmmm.... what's ahead?

Murray

 

[andysmith]

If that's the case, why not buy some cheap put spreads instead?

Quote from optioncoach:

Although support is holding, one can also argue that the market is topping out from its OCT rally. I still feel safer with deeper OTM puts than calls for now. If the support is broken I would still not expect the market to break down to 1200 without some severe catalyst. Even so, when I look to FEB spreads on the put side, I will still want to be as far below 1200 as I can be and still get a 3% return

 

[El OchoCinco]

You must have missed my post above where I said I actually would start buying put spreads if the support broke

Quote from andysmith:

If that's the case, why not buy some cheap put spreads instead?

 

[andysmith]

If you're best case is only a 3% return, aren't you looking at spending close to that whole amount if you have to hedge?

3% does not leave a whole lot of room for surprises and mistakes. I'm doing 45-60 day spreads for 10%,... and putting the hedges in for cheap same time as the actual spread...

Quote from optioncoach:

If we break through the support I highlighted in the charts I have attached, I will probably go long some XSP/SPY/SPX put options, depending on which I like and make some money off the the move lower. Pricing 1250 and 125 strikes and looking at verticals (bear put spreads). I would be willing to invest $1k to $2k on puts .

However I expect today's move to be on low volume. Even looking at the ES I am seeing a volume below 300,000 when large price swings usually reach 900,000 for the day so even the futures are trading light.

 

[andysmith]

The chart does indeed show support to be holding... but the way the market fell in a couple of minutes tells me there's some nasty internals at work... so I wonder how valid support/charts are right now...

Quote from optioncoach:

If you look at the charts I have been attaching on this page and on the previous page and BELOW you will see the support line I drew which has been holding. Today the SPX pretty much closed right on the line or just below it depending on how you draw it so due to the light volume and the margin for drawing error I would see we are on the cusp.

Tomorrow should really be a dead day but if it drops a lot and closes there, the support might indeed be broken and I will be adding some long puts to profit from the move lower, possible to the 1240 area and below but not sure.

 

[andysmith]

I meant buy put spreads as your primary position instead of selling credit spreads (if you expect the market to tank)... given premium is so cheap right now...

Quote from optioncoach:

You must have missed my post above where I said I actually would start buying put spreads if the support broke

 

[El OchoCinco]

Buying put spreads would not be a HEDGE for me, I would be taking a directional position ATM. My puts are at 1165/1175 and I see no need to hedge them at all right now since they are almost 100 points OTM with 21 days to expiration. I feel pretty confident as of today that those strikes will expire worthless and looking to make more money on a pure technical directional play. I am talking about a pure directional play on the SPX with long puts.

THis is not really related to my credit spreads, just an additional position I am taking on potentially.

Quote from andysmith:

If you're best case is only a 3% return, aren't you looking at spending close to that whole amount if you have to hedge?

3% does not leave a whole lot of room for surprises and mistakes. I'm doing 45-60 day spreads for 10%,... and putting the hedges in for cheap same time as the actual spread...