SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
i have many other spreads higher up that i received 1.5 on average that start at 1340; so honestly i plan on doing nothing and take my cash settled loss if that will come to pass. if i do lose the max, my month will be most likely breakeven. in this month, i do not even have any puts spreads, only calls.
You are correct Rdeyman. I was assuming that the margin was the same. Thus, the 5-point spread is less risky. The problem with 5-point spreads is that the slippage compounds rather quickly. You really have to fight for the fill that you want. Giving up 0.05 to the MMs on a 5-point spread is like giving up 0.30 to the MMs on a 30-point spread.
I thought your point was that the 30 point spread is less risky (based on probabilities of breaching the long option). Perhaps we have a different viewpoint on risk.
I've been reluctant to do larger spreads, but you've got me thinking that it might actually be less risky. I would consider the larger spreads when, as I posted earlier, I have an existing 1375/1390 bear call and want to add a 1390/1405 bear call as a new position. Adding such a new position would give me a resulting 1375/1405 bear call. It makes me nervous to think about adjusting this (which I'm beginning to think is illogical). It might actually have the two following benefits:
1) The probability of breaching the long on a 30 point spread is less than on a 10 or 15 point spread as you pointed out earlier. Therefore, the maximum loss scenario is reduced based on probabilities alone. Of course, Coach will point out that you should be adjusting the position before the short strike is breached (which I agree with). And with bear calls, you don't have the black swan risk so there should be time to make adjustments or get out of the way before the short strike is breached.
2) When it comes to adjusting, I could just adjust the short strike alone and not the entire spread. So, if I have the 1375/1405 and need to adjust, I could just buy back the 1375 and sell the 1385 or 1390 leaving the 1405 in place. It probably would be easier to adjust such a position because I'm only trying to get filled on one option and not a spread. I might even get better fills when trading just a single option.
Coach: What are your thoughts on this?
I've been reluctant to do larger spreads, but you've got me thinking that it might actually be less risky. I would consider the larger spreads when, as I posted earlier, I have an existing 1375/1390 bear call and want to add a 1390/1405 bear call as a new position. Adding such a new position would give me a resulting 1375/1405 bear call. It makes me nervous to think about adjusting this (which I'm beginning to think is illogical). It might actually have the two following benefits:
1) The probability of breaching the long on a 30 point spread is less than on a 10 or 15 point spread as you pointed out earlier. Therefore, the maximum loss scenario is reduced based on probabilities alone. Of course, Coach will point out that you should be adjusting the position before the short strike is breached (which I agree with). And with bear calls, you don't have the black swan risk so there should be time to make adjustments or get out of the way before the short strike is breached.
2) When it comes to adjusting, I could just adjust the short strike alone and not the entire spread. So, if I have the 1375/1405 and need to adjust, I could just buy back the 1375 and sell the 1385 or 1390 leaving the 1405 in place. It probably would be easier to adjust such a position because I'm only trying to get filled on one option and not a spread. I might even get better fills when trading just a single option.
Coach: What are your thoughts on this?
Quote from Cache Landing:
You are correct Rdeyman. I was assuming that the margin was the same. Thus, the 5-point spread is less risky. The problem with 5-point spreads is that the slippage compounds rather quickly. You really have to fight for the fill that you want. Giving up 0.05 to the MMs on a 5-point spread is like giving up 0.30 to the MMs on a 30-point spread.
Something about markets remaining irrational longer than traders can remain liquid comes to mind...
Welcome to the thread A.
Welcome to the thread A.
Quote from Aardvark:
I put in an order for 1/2 my allotment at 1250 and 1/2 at 1245 the 1245's got filled firstnot sure if 1250 will fill. I'm thinking we are at the top of the range and down is sure to come...but I've been thinking that for the past two months and have been wrong so far
) thx