SPX Credit Spread Trader

Futures pretty much always lead the cash. Someone else can explain the reasoning if you are confused about why.

Quote from andysmith:

Today's action shows how the futures are being pushed down first, and then being followed by SPX (assuming there is no lag in my realtime quotes for SPX).... I'm still puzzled by how the SPX can be manipulated by the futures.
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Or, a link at the bottom of all posts in a pseudo-signature e.g.


Current Positions: here (opens in new window)
Favorite JA Pic: here (opens in new window)

...but what do you expect for free? :)


Quote from Sailing:

Phil,

Just a thought on your positions keyword search page.....

maybe a keyword search based on the expiration of those positions. This would make looking back at various month expiraton positons easier.

Keyword Example: ExpirationMay05

:)
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OK, I'll wait for an explanation.

The confusion arises because the cash is supposed to be an amalgam of the 500 stocks that comprise it.... tail wagging the dog. Woof.

Quote from Arb Under Par:

Futures pretty much always lead the cash. Someone else can explain the reasoning if you are confused about why.
More...
 
Sailing,

Now use 20% of your total credit to buy some May 1265/1275 (or 50/60 or whatever around that area) put spreads and good things might happen.



Quote from Sailing:

FYI,

Just filled a May Put Spread:
1210p/1225p @ $1.00

Oil concerns beginning to ramp up May premium.

Vega increase really looking good on the diagonal.
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Just thinking more about what sort of good/decent hedges there are lying about. In the spirit of the VIX and the link between vol and spot in the SPX, let's think about another possibility - Fed Funds Futures (or Eurodollars if you prefer). The Fed would likely be forced to provide liquidity under almost any circumstance that would qualify as a Black Swan event, and many times the near term contract can be had 'at the money' where there is little risk of a cut priced in and not much of a bias to raise. If you have a bit of a handle on short term Fed policy, you can use this strategy on the outright futures positions - or options on the Eurodollar or Fed funds futures which provide a nice bang for your buck without the significant vol premia associated with the VIX or SPX options. Just an idea - I haven't backtested it yet.

Great thread!
 
SEARCH TERM: APRIL/MAY2006

BUMP UP of POSITIONS

MAY POSITIONS

-400 SPX MAY 1215/1225 Put Spreads @ $0.35

Credit = $14,000
Risk = $386,000
Return = 3.62%

Long 100 VIX MAY 20.00 Calls @ $0.20
Cost = $2,000


APRIL POSITIONS

SPX CALL DIAGONAL SPREAD (OPEN):

- 8 SPX APR 1340 Calls @ $4.70
+ 10 SPX MAY 1375 Calls @ $3.10

Net Credit = $660

Unrealized profit of about $1,000 for now but gonna let it run and make more off of it if I can.



SPX BULL PUT SPREAD (CLOSED):

- 350 SPX APR 1225/1235 Put Spreads @ $0.35

Net Credit = $12,250

Closed for net credit of $0.15 or $5,250



PUT SPREAD PARTIAL HEDGE (OPEN- and the reaons we are bullish lol):

+ 100 SPY APR 126/125 Put Spreads @ $0.10

Net Debit = $1,000
 
I will defer to those who trade or deal with the Fed Funds Futures. I am sure there are plenty of times the market will crash hard (JULY 2002) and the Fed does not change rates in response so that would be my only concern as a hedge.

Quote from c*f(x):

Just thinking more about what sort of good/decent hedges there are lying about. In the spirit of the VIX and the link between vol and spot in the SPX, let's think about another possibility - Fed Funds Futures (or Eurodollars if you prefer). The Fed would likely be forced to provide liquidity under almost any circumstance that would qualify as a Black Swan event, and many times the near term contract can be had 'at the money' where there is little risk of a cut priced in and not much of a bias to raise. If you have a bit of a handle on short term Fed policy, you can use this strategy on the outright futures positions - or options on the Eurodollar or Fed funds futures which provide a nice bang for your buck without the significant vol premia associated with the VIX or SPX options. Just an idea - I haven't backtested it yet.

Great thread!
More...
 
Quote from c*f(x):

Just thinking more about what sort of good/decent hedges there are lying about. In the spirit of the VIX and the link between vol and spot in the SPX, let's think about another possibility - Fed Funds Futures (or Eurodollars if you prefer). The Fed would likely be forced to provide liquidity under almost any circumstance that would qualify as a Black Swan event, and many times the near term contract can be had 'at the money' where there is little risk of a cut priced in and not much of a bias to raise. If you have a bit of a handle on short term Fed policy, you can use this strategy on the outright futures positions - or options on the Eurodollar or Fed funds futures which provide a nice bang for your buck without the significant vol premia associated with the VIX or SPX options. Just an idea - I haven't backtested it yet.

Great thread!
More...

This is one my present concerns. Talking about 9/11 scenario, near contract Eurodollar rose from (about) 95.78 to 96.27 (close), which is much less then expectations taken towards VIX (multiplier 2500), and eventually went up to 96.50 by September 20.
However this pattern looks more reliable for some reasons than VIX in regards to possible percentage of expected movement, which IMHO looks more realistic.
Another thing is that Eurodollar jumps up for some other reasons (fundamentals) and more often than VIX, so this insurance plan can bring ocassionally some returns even without disaster scenario.
This is again, only preliminary outlook. I am currently working on these simulations . I`ll keep you updated if interested.
 
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