SPX Credit Spread Trader

I would like to trade RUT but they don't have 5-point spread. I hedged not to adjust but because Stochastics was oversold and turned up so I know there was high percentage for it to go back up.

I don't buy options PUT or Call unless Stochastic tells me it's ok to do so.

For example I don't expect SPX to go further than 1294 which is its last resistance and it should go back down to 1250-60.





Quote from skeweddude:

piccon, great trade to benefit from both the hedge and spread and I hear what you are saying in regard to the small caps looking like they have room to run.

I started trading the RUT this month and am very glad that I found this thread, there's a lot of great information here and it also lead me to other great threads, such as risk's combo to fly.

I just let a RUT 750/760 C spread expire today (never got filled on the put spread I tried to place later on and I am brand new to this so no big deal). Pretty nice feeling but I was considering adjustment at the beginning of the month in regard to how close RUT was to my short strike ~ 15 pts. Something tells me that I should have put on an adjust and got lucky, but I was looking for penetration thru 740.

I am going to try and figure out how you arrived at your hedge (% wise), sounds like it was immediate and not an adjustment, but glad to see you are trading the RUT as well.

I traded the SPX this month as well and that bear call happily expired 40 points out, but the RUT is a different animal to me.

Great trading and happy weekend, sd
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Quote from piccon:

Donnav,

I am trying to see how I can use your strategy for Butterfly purpose.

When the market is going up like crazy, I would buy the two exterior wings Strikes and then Sell the middle Strike on big down day.

The two wings can make money on down day and then When adding the Middle, You will end up with a net credit.

I am going to experience it and I will let you guys know how it worked out.

Good Weekend

I am going to miss Monday trading though
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same to you:) I'll be watching...I'm still not comfortable with B-flys
 
Quote from piccon:

Donnav,

I am trying to see how I can use your strategy for Butterfly purpose.

When the market is going up like crazy, I would buy the two exterior wings Strikes and then Sell the middle Strike on big down day.

The two wings can make money on down day and then When adding the Middle, You will end up with a net credit.

I am going to experience it and I will let you guys know how it worked out.
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I don't see the advantage to leggin in on the butterfly. Well, let me rephrase that. I do see that your hypothetical example would be better than just executing the full fly at once. But if you are really that good at forecasting direction, you would be better off just buying calls, selling them at a profit before the correction, and then buying puts.

By legging in, there is a huge chance that you will merely increase the debit to get into the trade. Maybe so much so that finishing off the fly would provide a very improbable profit zone. Anyway, I think that the idea is great when compared to a standard fly. But it uses the exact same skills and risk management as simply buying long calls/puts. JMHO.
 
Legging in makes more sense on a credit vertical because it is a credit spread. If you happen to misjudge price movement a bit, you are still in a credit situation and, in Donna's case, still OTM. So the profit zone is still highly probable, you have just reduced your return.

Anyway, just thinking aloud, so I might not be making any sense.:D
 
Quote from Cache Landing:

Legging in makes more sense on a credit vertical because it is a credit spread. If you happen to misjudge price movement a bit, you are still in a credit situation and, in Donna's case, still OTM. So the profit zone is still highly probable, you have just reduced your return.

Anyway, just thinking aloud, so I might not be making any
sense.:D
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The problem was in my case I misjudged what my credit was...thinking I was already ahead I closed the 1195 then bought a 1190 for significantly less...netting only a .10 positive credit on the second 25 contracts...after a certain amt of time you really do give up too much THETA to make a good credit trade.
 
Quote from DonnaV:

The problem was in my case I misjudged what my credit was...thinking I was already ahead I closed the 1195 then bought a 1190 for significantly less...netting only a .10 positive credit on the second 25 contracts...after a certain amt of time you really do give up too much THETA to make a good credit trade.
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Yeah, time is a killer to legging into a credit spread. But I think if you are decent at forcasting price movement then it makes some sense. I just can't see any sense to legging into a debit butterfly. Simply playing long calls/puts is the same strategy with more potential profit and less complexity.
 
Quote from piccon:

Donnav,

I am trying to see how I can use your strategy for Butterfly purpose.

When the market is going up like crazy, I would buy the two exterior wings Strikes and then Sell the middle Strike on big down day.

The two wings can make money on down day and then When adding the Middle, You will end up with a net credit.

I am going to experience it and I will let you guys know how it worked out.

Good Weekend

I am going to miss Monday trading though
More...

I am in the process of trying that with my SPX P 1225/50/75 March Fly.

I covered the 50's at 4.80 -- too soon as the low was $4.00. If we get a decent down day I will sell them again and reduce the fly cost/end up with a credit. The risk is that the market will not turn around and what was a modest defined risk scenario has tripled in total risk until I make "another" adjustment.
 
What you just said make complete sense. I am buying Put right now because I feel the market will not sustain its move.

I will profit from down day with the PUT or convert it to PUT spreads.

I make money every month beside Spreads by buying Put or call based on market direction.

The fly is one idea but I have never done any B-Fly at all. I benefit from simple Call Put or Spreads.



Quote from Cache Landing:

I don't see the advantage to leggin in on the butterfly. Well, let me rephrase that. I do see that your hypothetical example would be better than just executing the full fly at once. But if you are really that good at forecasting direction, you would be better off just buying calls, selling them at a profit before the correction, and then buying puts.

By legging in, there is a huge chance that you will merely increase the debit to get into the trade. Maybe so much so that finishing off the fly would provide a very improbable profit zone. Anyway, I think that the idea is great when compared to a standard fly. But it uses the exact same skills and risk management as simply buying long calls/puts. JMHO.
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Quote from piccon:

I would like to trade RUT but they don't have 5-point spread. I hedged not to adjust but because Stochastics was oversold and turned up so I know there was high percentage for it to go back up.

I don't buy options PUT or Call unless Stochastic tells me it's ok to do so.

For example I don't expect SPX to go further than 1294 which is its last resistance and it should go back down to 1250-60.
More...

Thanks for the reply. Right after I posted I saw your newer post about not being able to get a 5 point spread. I like your put butterfly idea that you noted in response to Donna, hope it works out and looking forward to hearing further. Not only will I miss the market on monday, but I will not get to miss work on Monday...double whammy.
 
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