SPX Credit Spread Trader

B5476 · May 11, 2006

Quote from cdowis:

Novice trader here:

What is SET?

It is the value calculated to establish the settlement price for SPX options. It is derived from the opening prices of all 500 S&P stocks on the Friday morning after the options cease trading on Thursday afternoon.

It can ( and almost always does) differ from both the Thursday closing price of the index as well as the Friday opening price of the index. The nightmare scenario is that you think all of your short positions are OTM the night before so you let them expire. One or more of the S&P stocks gaps the next morning and you are suddenly short ITM options. For this reason it is always a good idea to close your short positions if they are close to being ITM.

El OchoCinco · May 11, 2006

:eek:

scienter · May 11, 2006

Novice back at ya: it is the price that the spx settles for at the open or expiration. In many case the SET can be substantially different from Thursday's close. Others may have more experience with it, but there have been some overnight moves such that the SET is 1-2% higher/lower than close the night berfore. There was great chart that someone posted a few weeks back that listed the Thur. close and the SET price for the past several years. It was very eye-opening for me. I was suprised at how much the SET can vary...check it out

Quote from cdowis:

Novice trader here:

What is SET?

Cache Landing · May 11, 2006

Quote from B5476:

It is the value calculated to establish the settlement price for SPX options. It is derived from the opening prices of all 500 S&P stocks on the Friday morning after the options cease trading on Thursday afternoon.

It can ( and almost always does) differ from both the Thursday closing price of the index as well as the Friday opening price of the index. The nightmare scenario is that you think all of your short positions are OTM the night before so you let them expire. One or more of the S&P stocks gaps the next morning and you are suddenly short ITM options. For this reason it is always a good idea to close your short positions if they are close to being ITM.

I'd say;

0-10 points OTM thurs afternoon, close the position for sure.

10-20 points keep them open if you're balls are made of brass.

20+ points will generally be ok.

cdowis · May 11, 2006

Thanks very much.

While I have your attention, can someone explain the difference between a butterfly and ic, regards risk/reward. I saw some interesting posts on the subject.

thanks

rallymode · May 11, 2006

Quote from B5476:

One or more of the S&P stocks gaps the next morning and you are suddenly short ITM options. For this reason it is always a good idea to close your short positions if they are close to being ITM.

the last set was a good example of this. GOOG and some others reported good earnings and gapped up taking the SET up to 1321 or so if i am not mistaken. The SPX high was 1316 or something like that. So just like momoney said, the SET knows no s/r levels and can bite you when you least expect it.

piccon · May 11, 2006

Positions Update

15 SPX 1375/1385 @ 1 now worth 0.4
10 RUT 820/830 @ 1.50 now worth 0.50
8 SPY PUT 129 @ 0.70 now worth 1.15

I am looking at 1250 for PUT and not higher. I think We are going to test MA(50) on SPX and RUT tomorrow

RUT MA(50)=754 Close at 757
SPX MA(50)=1300 Close @ 1304

I will do my best to enter some June 1250/1240 and maybe some May 1280/1270 as my short term oscillators are getting oversold.

It was about time for this bloodbath.

Quote from cdowis:

Sorry, the position is 1280/1250 puts.

Whew!

scienter · May 11, 2006

Cache, you said the SET:

"can ( and almost always does) differ from both the Thursday closing price of the index as well as the Friday opening price of the index."

As a relatively new spread trader, what suprised me the most about SET is that it can also differ from Friday's opening price.

Evidently, the opening price of the index must represent the opening price of different number of SP 500 stocks as compared with the SET or represent a different time period for calculation.

Do you know how this distinction is formed?

For example is the SET calculated using the opening price of ALL 500 stocks once they ALL open (could be sometime after 9:30)and the opening price of the index the actual number of stocks that open at 9:30 (whatever that number may be...and possibly less than 500)

dagnyt · May 11, 2006

The SET is determined by the opening price of EACH INDIVIDUAL stock in the index. If one stock has a delayed opening - then SET cannot be lknown until after thatd elayed opening. SET does not represent the price of the index in 'real time'.

The 'real time' opening price of the index itself is published - regardless of how many of the individual stocks have opened for trading.

Mark

scienter · May 11, 2006

Thanks, that what I thought...so the cash index will print the aggregate price of number of stocks that open at 9:30...even if the number is 400+. The SET is based on the opening price of all 500, which may be sometime after 9:30.

Does anyone know if the latest a SET has been established?

Quote from dagnyt:

The SET is determined by the opening price of EACH INDIVIDUAL stock in the index. If one stock has a delayed opening - then SET cannot be lknown until after thatd elayed opening. SET does not represent the price of the index in 'real time'.

The 'real time' opening price of the index itself is published - regardless of how many of the individual stocks have opened for trading.

Mark