SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
They do a good job for their customers. You'll be well served with them. They're more expensive than I like to pay but they're good nonetheless.
But now that you've heard the gospel look around and explore other indices. You may find other instrument more to you liking. Credit spread and Irons can be very good strategies mixed into an overall plan. But like I said thereâs reason they steer their retail customers away from the SPX. Ask Tom Preston or Sosnoff to recommend an index for you.
Good Luck.
But now that you've heard the gospel look around and explore other indices. You may find other instrument more to you liking. Credit spread and Irons can be very good strategies mixed into an overall plan. But like I said thereâs reason they steer their retail customers away from the SPX. Ask Tom Preston or Sosnoff to recommend an index for you.
Good Luck.
While waiting for an answer, I'll chime in with my very limited experience on ICs that I've traded on other indices. I've traded on the following:
SOX
MID
MSH
RUT
While Dr. ZhiVodka is no doubt right on the difficulty of getting filled at the mid on the SPX whereas the others may be much easier, with every other index I've been forced to adjust. All the other indices were relatively more volatile and always approached my short strikes more frequently than the SPX. This caused me to have to consider adjustments and often adjust. I have not lost any money with the SOX, strangely enough, as you would expect this one to be volatile. I'm ahead on the MSH, but have lost some. The RUT was a disaster, as the MMs are obnoxiously stingy and tightfisted and won't give an inch. Strangely, the MID was also a disaster, which surprised me as I expected it be somewhat similar to the SPX but it was much more volatile than I expected.
These are indices so volatile is a relative term (as opposed to stocks).
So maybe I'm not getting the best fill on the SPX but I think it gives me the best chance to avoid adjustments and keep the entire IC credit. If you have to adjust or get out because of a move against a short, you almost always lose some or all of your profit if not a lot more. So if I don't get a nickel or a dime on the SPX because it is not competitive, it still seems to me that it is worth it, because my odds of having to adjust or get out all together are lower with the SPX than with the other indices. So, to me, it's not just a question of best premium fill (of course I want to get as much as possible), but also safety of the index chosen. You can view it as a tradeoff, but I make good money and sleep better at night with the SPX than with the others.
This is just my experience, but I do know of another trading group that pretty much has had the same experience.
SOX
MID
MSH
RUT
While Dr. ZhiVodka is no doubt right on the difficulty of getting filled at the mid on the SPX whereas the others may be much easier, with every other index I've been forced to adjust. All the other indices were relatively more volatile and always approached my short strikes more frequently than the SPX. This caused me to have to consider adjustments and often adjust. I have not lost any money with the SOX, strangely enough, as you would expect this one to be volatile. I'm ahead on the MSH, but have lost some. The RUT was a disaster, as the MMs are obnoxiously stingy and tightfisted and won't give an inch. Strangely, the MID was also a disaster, which surprised me as I expected it be somewhat similar to the SPX but it was much more volatile than I expected.
These are indices so volatile is a relative term (as opposed to stocks).
So maybe I'm not getting the best fill on the SPX but I think it gives me the best chance to avoid adjustments and keep the entire IC credit. If you have to adjust or get out because of a move against a short, you almost always lose some or all of your profit if not a lot more. So if I don't get a nickel or a dime on the SPX because it is not competitive, it still seems to me that it is worth it, because my odds of having to adjust or get out all together are lower with the SPX than with the other indices. So, to me, it's not just a question of best premium fill (of course I want to get as much as possible), but also safety of the index chosen. You can view it as a tradeoff, but I make good money and sleep better at night with the SPX than with the others.
This is just my experience, but I do know of another trading group that pretty much has had the same experience.
Generally speaking anything that is multiply listed and has decent liquidity.
SPY, NDX maybe the IWN.
You could also look at options the SPU. Huge prem in those. But it's different animal altogether. The multipler is $250 and it's only on the Merc, vols and skews are different and the spreads are wide. But that prem is enormous. Also the Bond and Notes at the CBOT.
SPY, NDX maybe the IWN.
You could also look at options the SPU. Huge prem in those. But it's different animal altogether. The multipler is $250 and it's only on the Merc, vols and skews are different and the spreads are wide. But that prem is enormous. Also the Bond and Notes at the CBOT.
Tom Sosnoff is big on the IWM. But that index can easily move 5% in a month, and there is little premium beyond a few % otm. So IC's only work in the flattest markets. You have to do bc or bp spreads and be right on market direction to score.
The strikes are 1.00 so margin is a lot less, but just not the cushion of SPX. That cushion sure feels good!
Thanks for the comments.
I see that most of the indexes listed have low premium or/and low open interest (for OTM strikes), especially if we want to go OTM far enough to sleep at night.
So I agree that the disadvantages of the SPX are not that bad for this credit spread strategy. At least for me.
I am still not convince that there is much better deal for retail trader. I think it depends a lot on the trading style.
I see that most of the indexes listed have low premium or/and low open interest (for OTM strikes), especially if we want to go OTM far enough to sleep at night.
So I agree that the disadvantages of the SPX are not that bad for this credit spread strategy. At least for me.
I am still not convince that there is much better deal for retail trader. I think it depends a lot on the trading style.
I'm not sure which exchanges it's traded on, but I have had a history with trading OEX spreads as well. I think OEX is pretty good index to do IC's on as well.
I put on a 550/575 Iron Condor for September options, got $1.90/contract for the whole spread. There was some nervous times last week and the beginning of this week, when OEX was approaching my short call strike. I was debating whether to close my call spread, but I stuck it out and luckily it worked out...hope I haven't spoken too soon. OEX options expire on Thursday too,right??
I'm thinking of opening a 540/585 Iron Condor for October. I'm looking for $1.50 or so for the whole thing. Have to see what markets do tomorrow.
Good Luck.
Daytrader85
See that's exactly the way I trade. I'm always legging and picking direction and building positions over the course of the cycle. I rarely if ever put on an Iron all at one time.
But I'm also not always short gamma and vega. I trade many other types of positions to massage my risk.
But it's all good. To each his own.
BTW: I think I heard a stat recently (you'd have to verify it) that the market will stay in a 3.5% range 85% of the time over the course of any given 30 day period.
It's the 15% of time that you have to sweat. Further it's the 1% when a discontinuity occurs that you really have worry about being short all that vega.
But I'm also not always short gamma and vega. I trade many other types of positions to massage my risk.
But it's all good. To each his own.
BTW: I think I heard a stat recently (you'd have to verify it) that the market will stay in a 3.5% range 85% of the time over the course of any given 30 day period.
It's the 15% of time that you have to sweat. Further it's the 1% when a discontinuity occurs that you really have worry about being short all that vega.
I believe that the OEX is the same as the SPX, CBOE only.
Cody
Cody