SPX Credit Spread Trader

Mark:

For me the IV is not as big a consideration on the Call side because of the nature of the skew. As was stated the put skew makes it harder to get a decent credit putting on the position. The Call skew actually helps me get a nice small credit for the position.

If the market rallies, the drop in IV will actually help me a bit since the front month will shrink more and this hit the short premium greater. The July calls are much further OTM. I am not banking on any IV drops but if the market does rally and IV does pull back from the 17 now back to 12 or so, the short JUNE will take it in the butt more than the further OTM July calls.

I am playing this more as expecting the market to go no higher than my short strike and then either adjust to a new position or simply take off the JULY calls for additional profit.

For example, my MAY/JUNE diagonal was for a credit of $450. The MAYS expired worthless and the JUNE calls are worth about $600. I could sell them now and just add to the profit or let them run as a free lottery ticket, so to speak. Since they are at 1385 strike I may just take the money now since I do not expect us to move up higher far enougn to push those calls that much higher.
 
Attached is the updated spreadsheet showing the SPX close on Thursday versus the SET on Friday morning over the last eight years through May of this year. Since this is pretty easy to update from here forward, this will be the last post of an updated spreadsheet.
 

Attachments

Hi Coach
Very interested in Diagonals, Is the margin required the same as the difference between the long and short strike? So to do 1 of these for learning puposes Short 1310 Long 1350 Margin $ 40,000 or so +- credits
Thanks John
 
Diagonals or Straddle/Strangle swaps generally go on as debits. Later on when you roll them into fly's or Irons or whatever then you'll have margin requirements.


Quote from ready:

Hi Coach
Very interested in Diagonals, Is the margin required the same as the difference between the long and short strike? So to do 1 of these for learning puposes Short 1310 Long 1350 Margin $ 40,000 or so +- credits
Thanks John
More...
 
Quote from rdemyan:

Attached is the updated spreadsheet showing the SPX close on Thursday versus the SET on Friday morning over the last eight years through May of this year. Since this is pretty easy to update from here forward, this will be the last post of an updated spreadsheet.
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You mean we have to start doing this ourselves?:D
 
Mo,

It's a warm feeling that someone is watching out for me. The DD is doing okay. Even there is a paper lost, I don't feel that much because I have taken in a bit of premium already. Since I closed June 1310 call already so here is the report on diag put.

Sold June 1290 for $16.10 Bought Jul 1265 for $14.40. Now June 1290 is $29 and Jul 1265 is $24.20. Paper lost $310.

I escaped 3 of 1250-1260 May put narrowly. I'm not proud of the trade. It was by luck that I did not loose money.

Thanks for other explanation on this trade and riskarb journal. If I may ask, does your job involve teaching ?

Thanks,
-Nick

Quote from momoneythansens:

Hi Nick, hows your double diagonal going? Not quite as sideways as you'd have liked this week huh? Nice to see the journal is still ticking along.

RE: gamma scalping - this really is best done in the last two weeks when kurtosis kicks in IMO so I would say the recommendation does not apply to the time fly position.

You can always scalp with options too.

Right, really must go damnit!

MoMoney.
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Yes the margin is just calculated as difference between strikes times number of actual short spreads that are part of the diagonal. So a 1*2 short*long diagonal only has 1 credit spread imbedded. At 40 SPX points *$100 that is $4,000 in margin.



Quote from ready:

Hi Coach
Very interested in Diagonals, Is the margin required the same as the difference between the long and short strike? So to do 1 of these for learning puposes Short 1310 Long 1350 Margin $ 40,000 or so +- credits
Thanks John
More...
 
These diagonals are credit spreads so they have the margin requirements since the front month has the short calls at a lower strike.


Quote from Dr. Zhivodka:

Diagonals or Straddle/Strangle swaps generally go on as debits. Later on when you roll them into fly's or Irons or whatever then you'll have margin requirements.
More...
 
Doh! My bad OC. That's what I get for not reading the thread.

Quote from optioncoach:

These diagonals are credit spreads so they have the margin requirements since the front month has the short calls at a lower strike.
More...
 
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