SPX Credit Spread Trader

Coach:
I know you have purchased VIX May calls for hedging against a black swan type event. To take this one step further, what do you think of placing a contingent order to sell the calls if the VIX reaches a predetermined amount. This is all hypothetical but for example:

Say you have sold the 15 May 1215/1225 put bull spread where margin at risk is $15000 and also purchaced 15 VIX May 20 calls.

Also assume you placed a contingent order to sell the VIX May calls at 10.00 if the VIX reached 30 or greater. OX lets you place this type of trade.

If there was a black swan type of event and assuming the above contingent order was filled if the VIX shot up to 30 or more, the full amount of your margin at risk would be protected. Thiis assumes the calls will be worth 10 if the VIX is at 30 or more. I know we don't really know what will happen to the calls and there are a lot of ifs, but what do you think? Thanks for you response.
 
Quote from rallymode:

I really don't see how thats any beneficial. Yes you certainly get another quarter or two out of the put spreads but over the long term with the risk you are undertaking by widening the spreads i dont see that being any better to say the least especially considering its the put side you are widening.
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we're doing REALLY cheap gamma here:p its not necessarily better its just that with his short put strike at 1225 the probability of that expiring ITM is 6% (as of today) which I would be quite comfortable with so why not widen the strike to get more $$. More margin at risk but very high probability of success.

Then his short call is like your's only 5 pts apart (on the 1345/1350) which is pretty manageable.
 
Also as Coach has said many times in this journal there are so many ways to do this and the individual has to do what feels right to them...ie what lets you sleep at night. I don't think any of us trade identically.
 
Coach,

You PROP traders are killing us retail guys..... we used to be able to count on you for market direction (at least a sure change in direction)... but his scalping is really confusing the Market Makers....

Now we don't have any edge!

:)

Murray




Quote from optioncoach:

Murray:

Re Diagonal Calendars.

This is not the way they are supposed to be traded but I have been having some good luck/fun scalping the short side. As you rememebr from my last lucky story scalping the short leg of the diagonal spread for $2000 or so I was left with 10 long JUNE SPX 1375 Calls.

Well today on earlier moves higher I sold 5 MAY 1345 Calls and bought them back when they dipped. I did it again on the late surge in the market towards the end of the day selling 5 1345 Calls and bought them back right after 4:00 for $300 scalps today. I would not recommend this approach but just using my intraday signals for ES I was getting in and out LOL.

I sold 5 so that if the market moved higher I had a 5*10 spread and could sell more calls when I needed to. I have just had good swings to scalp the short side and will keep doing it all month long if the market lets me lol.

Anyway, just though I would share this unintentional way to trade the diagonal spread :D
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Quote from BoSox1962:

BoSox:

Good credits on the spreads. My only comment is that wouldn't you have 4 separate margin requirements for your spreads instead of 2 if you were doing equal strike IC's?

Greetings Folks, \

I have been follwoing this thread (occassionaly contributing) for a few months. So far, March & April have been good results, both months all spreads expired worthless (SPX & OEX). I've learned a lot by following the commentary & hope to continue. High level strategy is similar to Coach's, 30 - 40 days out, ~70 points OTM.

I'm still a cutting teeth when it comes to hedging (when to do & where), meaning once the index (assuming I'm trading the SPX) gets 10-15 pts within my short strike, I typically look to the SPY to hedge. I would welcome some of your commentary on how best to react to a move toward your short strike (i.e. what options or actiosn you consider to hedge you earlier spread)

May positions:

MAY 1210/1225 p, .95 credit, 4/12
MAY 1195/1215 p, .70 credit, 4/17

MAY 1345/1350 c, .70 credit, 4/18
MAY 1350/1360 c, .65 credit, 4/24
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