SPX Credit Spread Trader

[Chipper7]

Quote from labib52:

I think this case is different , I'm buying the 1600 and selling the 1550 put. This is a debit spread , paid in cash . They deduct the amount from your account and no margin involved.

Yes, it is different. I think that the abusive trading was doing DITM calendars so that the long was actually cheaper than the short and thus raised cash.

The problem is not with what you are trying to do. It is that the OX system currently flags any trades with these DITM puts that have negative time value, doesn't allow the order, and requests that you call in. You then get a broker that may or may not know what is going on. If you don't get the feeling that the broker is understanding then ask to talk to the margin department. They should be able to review your trade history and make sure that you know what you are doing and then allow the trading.

You may wish to talk to the margin department anyway. They might be able to work out a system like I have where you e-mail someone so that they can allow the trading on-line. Otherwise, you have to call in the trade which is a pain. Of course you can also take your trading elsewhere.

I too use these DITM put spreads to get decent "interest" on my emergency capital. (I currently have the June 1425/1400 spread, which is probably riskier than yours.) The advantage over money markets is not only better returns, but that taxes on this "interest" fall under the 1256 contracts 60/40 rule which lowers the tax bite.

Anyway, I went through this process not too long ago and for the moment it seems tolerable. Hope this helps.

Chip

 

[Chipper7]

Quote from labib52:

Yes it is Dec 2006

it was around $ 46.50 but I was trying GTC with a debit of $44
if it's filled will be $600 return on margin $4400 = %13.6 for 11 months and extremely low risk . I don't think the SPX wil hit 1550 by Dec. 2006
Labib Imtanes

By the way, I looked at this spread and it is currently around 46.9. Since these are so far ITM the spread price does not move much so your odds of getting filled generously are pretty low. They are also not traded very much. Hence, it is unlikely you will get anywhere near 13.6% without more risk. Not surprising given that the true risk-free treasuries are in the 4-5% range.

Chip

 

[Cache Landing]

Quote from Sailing:

In response to TradeKing.com

It doesn't cost anything to open an account at tradeking.com

The site does have a much nicer, but similar interface than OXs.

What I like most so far is the volatility graph they impose from ivolatility.com, the option strategy scanner from ivolatility.com, the 'chains' show IV and delta on the same page as the b/a, the order placing screen is much cleaner, the entire web-based platform runs faster, you also get earnings events, dividends, and splits in graphical form, the financial and fundamental information is real nice, and the insider trading is in visual as well as numerical.

For free... it's worth signing up for... in fact... I'm transfering my OX account to them next week. I'll let you know the spread fills and customer support soon.

For those of you who have not tried speedresearch.com, it's awesome. Even if you have TA software, etc... you can use all your software simultaneously in multiple windows.. with unlimited stocks open.. all at once... it's brillant software. it's like having an assitant to all the timetasks... allows you to make the decisions. My entire investment group uses it... once people see you use it, they think you have more information than them... but you really just have it faster, quicker, and organized... all with one click. You get a free 30-day trial... I strongly recommend giving it a shot. Any questions... let me know.

Enjoy the weekend.... off to ski,

Murray

Just a heads up to those who might care (or newbies unfamiliar with the options world).

I think that Tradeking has done a pretty good job of setting up there platform, but a couple things to keep in mind. These won't affect many of the people on this thread however.

They boast a $0.65/contract commiss. There is a $4.95 one time charge per trade with that, and it is charged for each leg of a spread or combo order. This isn't as big a deal for high volume players, as the .65 commiss. makes up for the extra one time fees. For those just starting out (say trading a 2 contract vertical), that's a pretty hefty $5.60/contract. Just a word of caution to the small account beginners out there.

As for the experienced traders. They are still working on their options order screens. For options they currently only allow limit, market, and stop orders. No conditional orders, no trailstops, etc. Personally I love the trailstop, so I'll hold out for now. The customer service guy said to expect one or two different choices to start making it to the options platform shortly with the rest to come in the hopefully not too distant future.

That said, I do like a few of the features that they have. Since it is free to setup an account, maybe I'll open one for those features for now.

 

[bcreech]

I second this motion; calling the OX desk about a trade, in my opinion, is about as helpful as calling my sister.

"Uhh.. well.. the bid is .40."

Quote from labib52:

This morning I was trying the following trade online :

Buy to open SPX DEC 1600 P
Sell to open SPX DEC 1550 P

I got the following message from OX:

ATTENTION
To place trades on securities with inverted pricing, please contact our trading desk at (888) 280-6505.

when I contacted them, they said that there should be no problem placing such order. I kept trying and I kept getting the same message.

Did anybody have similar experience?
I cannot get an answer from OX.


Labib Imtanes

 

[Cache Landing]

Quote from bcreech:

I second this motion; calling the OX desk about a trade, in my opinion, is about as helpful as calling my sister.

"Uhh.. well.. the bid is .40."

IMHO ToS has the best customer service. I just wish they were a little more competitive with their commiss. Could they be as good as they are if they were only charging 0.75/contract?

 

[bobbyvl]

Optioncoach,

Can you comment on the advantage and disadvantage to creating iron condors with QQQQ? I was thinking the Qs might be better because you can trade it up to the last business day before expiration and the settlement is price should be the closing price before expiration date. With the SPX index the settlement price can be 1% higher than the opening price of the index on Friday morning.

Thanks,
Bob L.

 

[burrben]

This is why in 2010 there won't be one product made in America by people who take pride in creating a quality product. If you want the equivalent of a tee-shirt made in china, go to tradeking. If you want a institutional level quality trading platform, stick with TOS and pay the extra .50/contract, get amazing customer service, free education, and most importantly quality execution.
Why does every American want something for nothing and then bitch about it when he doesn't like what he gets.

Quote from Cache Landing:

IMHO ToS has the best customer service. I just wish they were a little more competitive with their commiss. Could they be as good as they are if they were only charging 0.75/contract?

 

[RichardRimes]

Quote from skdoyle1:

This is why in 2010 there won't be one product made in America by people who take pride in creating a quality product. If you want the equivalent of a tee-shirt made in china, go to tradeking. If you want a institutional level quality trading platform, stick with TOS and pay the extra .50/contract, get amazing customer service, free education, and most importantly quality execution.
Why does every American want something for nothing and then bitch about it when he doesn't like what he gets.

I have to agree...TOS has my loyalty..for life...unless they sell themselves getting fills .10 below limit pays for a lot!

 

[andysmith]

TOS' software developers are all in St. Petersberg, Russia... and their chief software guy is Chinese. Welcome to the global economy. You're still thinking in terms of "borders and cultures" from the last century... watch out, you might get replaced soon by someone twice as smart, working twice as hard, at half the pay!

We live in interesting times.

Quote from skdoyle1:

This is why in 2010 there won't be one product made in America by people who take pride in creating a quality product. If you want the equivalent of a tee-shirt made in china, go to tradeking. If you want a institutional level quality trading platform, stick with TOS and pay the extra .50/contract, get amazing customer service, free education, and most importantly quality execution.
Why does every American want something for nothing and then bitch about it when he doesn't like what he gets.

 

[El OchoCinco]

You certainly can do Iron Condors on any index or index ETF. The Qs do not have as wide a range as the sPX so naturally the strike selection and range is much tighter and you need to take that into consideration. If youdo not like the SET feature of the SPX, then look into the SPY, which I still think is too tight to go sufficiently OTM. But I assume SPY and QQQQ have the same drawbacks.

One thing I have said often on this journal is that there is no reason that SET should be problem. There is no reason to hold a position through SET if you are within 10 points of your short strike, and perhaps even 15 points. I may do it in a rare situation based on some underlying analysis of the market but it is very easy to avoid the problems of SET, and that is closing your position if your short strikes are close to the index. You shoudl still be able to get out with a profit.

I do not personally track ro trade the Nasdaq so in theory you can credit spreads on the Naz and perhaps use the MNX (too lazy to look it up I hope that is right lol) or so as well as the QQQQs.

Quote from bobbyvl:

Optioncoach,

Can you comment on the advantage and disadvantage to creating iron condors with QQQQ? I was thinking the Qs might be better because you can trade it up to the last business day before expiration and the settlement is price should be the closing price before expiration date. With the SPX index the settlement price can be 1% higher than the opening price of the index on Friday morning.

Thanks,
Bob L.