SPX Credit Spread Trader

Heatheranderson · Jun 1, 2006

I've generally had bad experiences with the RUT. It's too volatile and the MMs are RBs. I'm only trading the SPX right now and am quite happy.
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How much do you allocate your money to this strategy?

El OchoCinco · Jun 1, 2006

Wanted to put a chart in and let you know what I am seeing. We got a retracement to 50% on the recent drop and a potential bearish flag forming on this pullback. Would not be surprised if we are overall lower the next day or so with 1285 and 1295 as any overheas resistance for continued moves higher.

Interesting thins is that we might be inclined to bounce around this range as different economic news filters in. 1295 to 1245 is what I think now. Each economic report could change this given the tendency of the market to overreact to each piece of news (i.e. today's surge on nothing too positive lol).

rallymode · Jun 1, 2006

Quote from ktm:

Do any of you guys use IB for SPX AND use the spread trader to place your orders? In other words, the order is displayed as a spread - with typically purple quotes representing existing MM size and the natural spread?

I have a problem with the futures options spreads that I am discussing with IB, and I need to find out if I have my facts right about how the spreader is supposed to work.

Thanks

ktm

i've been trading spreads through IB, what's your question/problem and maybe i can help.

ktm · Jun 1, 2006

Quote from rallymode:

i've been trading spreads through IB, what's your question/problem and maybe i can help.

Thanks... I think I've found the answer though.

My issue was that IB was not filling ES spreads. I was getting purple quotes that were appearing to lock and then cross the market in my spread - like my order was invisible.

The problem is that one cannot route to SMART with futures options. Only GLobex can be the exchange destination, which means it will be represented as a single order and not eligible for separate leg fills, as is the case with SPX.

That's disappointing. I was hoping it was some technical glitch.

rallymode · Jun 1, 2006

Quote from ktm:

The problem is that one cannot route to SMART with futures options. Only GLobex can be the exchange destination, which means it will be represented as a single order and not eligible for separate leg fills, as is the case with SPX.

I've never got around to learning how to use the spreadtrader. I enter the spread orders directly as market lines with a right click->generic combo. When you do it that way, globex is always the only option available for the ES symbol.

skanan · Jun 1, 2006

Report on put Diag Jun/Jul 1290/1265.

As an experiment, I bought a put diag 1290/1265 Jun/Jul when the market was around 1295. Now, with SPX at 1285, the put diag shows paper profit $410 on the short side and $100 on the long side :-)

I guess I'll try to close it out tomorrow. When the index was near 1250, the position had a paper lost around $700.

-Nick

Sailing · Jun 1, 2006

KTM,

Do you find using Options of Futures and SPAN margin a huge advantage over Retail Margin?

And... how is the liquidity as compared to similar Option strikes on the SPX?

We have two appointments in Chicago in June to discuss trading Options on Futures..... mostly for increased capital preservation management.... vs. retail trading.

Your thoughts appreciated

Murray

Quote from ktm:

Thanks... I think I've found the answer though.

My issue was that IB was not filling ES spreads. I was getting purple quotes that were appearing to lock and then cross the market in my spread - like my order was invisible.

The problem is that one cannot route to SMART with futures options. Only GLobex can be the exchange destination, which means it will be represented as a single order and not eligible for separate leg fills, as is the case with SPX.

That's disappointing. I was hoping it was some technical glitch.

elovemer · Jun 1, 2006

Rallymode,

Do you have to leg in.... to place SPX spreads using IB ?

.... am paying $26 comish per 10 contract SPX spread.
.... feel that it is high when compared to IB.

I would like to lower my commission costs.... but thought that legging in was the only option with IB for the SPX.

thanks
elove

PS. thanks for this thread coach :0) .....thanks alot

Quote from rallymode:

I've never got around to learning how to use the spreadtrader. I enter the spread orders directly as market lines with a right click->generic combo. When you do it that way, globex is always the only option available for the ES symbol.

LeonPhelps · Jun 2, 2006

Man, I've been reading all these posts trying to soak up some knowledge. Whew, I thought writing credit spreads were pretty simple but you guys take it to a new level.

One thing I don't understand. I noticed people were quoting DonnaV to answer her questions. But when I went back I couldn't find any of her posts. Like she was a ghost - they all disappeared. Did she get booted/censored? ET then deletes all of someone's messages? Dude that's harsh.

ktm · Jun 2, 2006

Quote from Sailing:

KTM,

Do you find using Options of Futures and SPAN margin a huge advantage over Retail Margin?

And... how is the liquidity as compared to similar Option strikes on the SPX?

We have two appointments in Chicago in June to discuss trading Options on Futures..... mostly for increased capital preservation management.... vs. retail trading.

Your thoughts appreciated

Murray

Margin wise, yes it is a huge advantage as you get about twice as much margin if you are on BOTH sides of the market. The simplest example is an OTM naked call and an OTM naked put: with SPX you pay separate margin for each, with SPAN you esssentially only pay for one side. It has been a few years since I really looked at SPX as I've been using SP/ES for that time, although I understand SPX has 60/40 tax treatment nowadays.

I think liquidity is far better in SPX, although the CME recently moved the dime tick theshhold to $5 from $3 and added a second set of contracts to expire EOM, so there's more rolling and writing capability throught out the year. It is still very easy to move 400 contract blocks in both SP/ES.

An additional concern for those managing OPM is that SPX is considered a security and subject to SEC regs, whereas futures options fall under the commodity regs of the CFTC (NFA). There are very distinct differences in licensing and registration requirements at the state and national level depending on whether one trades securites or commodities.

Another advantage of SPAN is the ability to incorporate futures into the position and reduce exposure and margin. If you are going with spreads, as most are in these products, you need the ability to enter spreads. Legging is tough over in the SP/ES camp!!!