SPX Credit Spread Trader

The initial and maintenance SPAN margin does look a lot more attractive in the options on futures in terms of ROI. I dont have experience getting filled with the bid ask spreads.

I compared that for the equivalent strikes in the equity option. Of course I have to bear in mind that this is only the current maintenence and changes as the underlying moves.

I looking into it in XPRESSTRADE and a trial account in optionvue.

I havent traded these so this is all currently pure theory. I have applied for a simulated account with Man financial.

Anyone knowing more than this please feel free to chime in.
SS
 
I think some here have mentioned that the SPAN margin did make the options on futures more attractive in many ways. Also the ability to trade the futures against it and have a direct hedge (as opposed to trading futures against the SPX and simply have a profit hedge but not a combination position for margin purposes).

If that is the Xpresstrade which is a sub of Optionsxpress, I know a broker experienced with options and futures at Xpresstrade I can put you in touch with to talk more about it. If so PM me.

Quote from screenstruck:

The initial and maintenance SPAN margin does look a lot more attractive in the options on futures in terms of ROI. I dont have experience getting filled with the bid ask spreads.

I compared that for the equivalent strikes in the equity option. Of course I have to bear in mind that this is only the current maintenence and changes as the underlying moves.

I looking into it in XPRESSTRADE and a trial account in optionvue.

I havent traded these so this is all currently pure theory. I have applied for a simulated account with Man financial.

Anyone knowing more than this please feel free to chime in.
SS
More...
 
Coach

It is reassuring to know that to date you have never had to use it.

Even in times of 9/11 and such it is good to know you were able to get away with just rolling down your spreads rather than pushing the little red PREGO panick button ;-)

How long have you been doing OTM credit spreads on the SPX for ?

From these OTM spreads what would be your monthly average return without getting to specific of course ?

Finally what are your thoughts on standard deviations as a tool? I tend to use these as a guideline for where I will write my shorts with success ?

Again love the thread :-)

Thanks again,
SteveJ
 
Take John Summa's class (options nerd) if you want to do this...


Quote from screenstruck:

The initial and maintenance SPAN margin does look a lot more attractive in the options on futures in terms of ROI. I dont have experience getting filled with the bid ask spreads.

I compared that for the equivalent strikes in the equity option. Of course I have to bear in mind that this is only the current maintenence and changes as the underlying moves.

I looking into it in XPRESSTRADE and a trial account in optionvue.

I havent traded these so this is all currently pure theory. I have applied for a simulated account with Man financial.

Anyone knowing more than this please feel free to chime in.
SS
More...
 
Well first let me say that I find nothing wrong with rolling into a Prego Fly. If the market is falling hard, for example, rolling a put spread down will cost money and still put you in harm's way. Rolling into the Prego Fly will require a small net debit compared to the capital at risk in the credit spread and if the market keeps moving lower, you could actually make some good money. On the other hand if the market quickly reverses you only take a small limited loss. So a Prego Fly adjustment is not something to be feared but simply a tool to use when needed to limit your risk and prevent taking a large loss.

Now in 9/11 I was not in any positions (thanks to workload at the time I was saved ;)). But in a 9/11 situation I would have skipped any adjustments due to the severity of the drop and simply rolled into a PREGO Fly or shorted futures and focused solely on limiting my losses. Again, a Prego Fly is just another means to limit risk so if the market is making a huge move, I have ti put it on without emotion. I will be safer and better off in the long run when the market makes such a large drop than trying to stay out in front of the train.

I have been doing OTM credit spreads for almost 3 years and I basically average about 2% a month which usually includes some small limited losses (i.e. I usually make 4-5% in most months and adjustments/limited losses smooth out the average.

Standard deviation is a tool I use through implied volatility since IV is one Sigma. If you take the ATM SPX straddle price, you are getting a representation of the Market Maker's pricing for a standard deviation move distribution in the market until expiration. I have said that a good shortcut method is to double that and use that range as a good starting point for strike selection. Of course one should not use this tool alone.

So SD is certainly a good guidance tool I would use along with support and resistance, trendlines and seasonal considerations, as well as fundamental analysis of what is going on in the market.

Quote from SteveJ:

Coach

It is reassuring to know that to date you have never had to use it.

Even in times of 9/11 and such it is good to know you were able to get away with just rolling down your spreads rather than pushing the little red PREGO panick button ;-)

How long have you been doing OTM credit spreads on the SPX for ?

From these OTM spreads what would be your monthly average return without getting to specific of course ?

Finally what are your thoughts on standard deviations as a tool? I tend to use these as a guideline for where I will write my shorts with success ?

Again love the thread :-)

Thanks again,
SteveJ
More...
 
Coach:

What do ya think. Start putting on March bull puts today given the downturn this morning or do you think it's going to continue after the FED today.


Quote from optioncoach:

MARCH is on the block at 45 days to expiration. Some spreads I will consider:

MAR SPX 1200/1210 @ $0.20/$0.90

or MAR SPX 1205/1215 @ $0.10/$1.30

EDIT: Also will follow the MAR 1175/1190 @ $0.20/$1.25

That is as high as I would go since the market could turn over.

However looking at the chart I am attaching below, the upward channel was confirmed again in the SPX daily charts and we even poked above it a bit today. More good news from the FOMC meeting tomorrow and we might run higher. Even a down day will keep us in the upward price channel.
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Already placing orders for some bull put spreads as we speak ;) I do not expect the FED to say anything truly unexpected or for anyone to be truly shocked at another .25 raise in interest rates. Technically we are still in a bullish pattern even though the steam seems to be waning.

For the best protection I would not push your luck with any spreads over 1200 or 1210 for now. If you can get in a spread with a short strike at 1200 or lower, even better, giving you the most amount of support levels in between you and the index.
 
a lot of open interest in the 1200's and 1190's..Heather your Feb bear calls should feel much better now!

Quote from Miked0801:

And google goes boom - tomorrow's market should be interesting...
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Placed an after hours market order for FEB SPX 1185/1200 and was filled for .85 as the google annoucement made the wires.

Tomorrow should be interesting....

Murray
 
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