SPX Credit Spread Trader

SPX 1235/1240 for $1.5 credit closed at breakeven. Better give up the credit than lose the risk here as far as i am concerned. Tough market to read.
 
Quote from mantenar:

I closed the put credit spread for 2.75 - The total loss is 2.00 for the spread.



Optioncoach,

I have credit spread - 20 SPX 1225/1210 . It seems there is strong resistance at 1235. But , the futures are off by 5 points. SPX will open below 1235. I think I have the following options

1 - Close the spread and take a loss of 4.00 per spread
I tried to close the spread and it did not get filled on Monday. The mid price of spread had moved from 1.65 to 3.75. I readjusted many times. But no luck. I should have been more aggressive by offering the price (mid price + 20)

2. Convert into B-fly by buying debit 1245/1225 spread by for 6.00. It seems to be expensive. Sell 1185/1175 credit spread (0.40) to finance B-fly at some risk

3. Wait one more day to gain more than theta - more risk and it may not be good option as THETA decay and VOL increase will not offset the losses. I tested in TOS, if it wait till thu,the spread prices may not drop because of the volatilty.( assuming SPX is at 1225)


4. Just want to how to do box for this - Do I have to buy a call spread - sell 1210 call (42.00) and buy 1225 call (18.00 ) . It seems very expensive.

5. Roll it down- 1185/1175 - Is it good option in the last week of expiration.

I have no other Hedges in place. Please advise based on the market sentiment and SPX support/resistance.
More...
 
Sometimes taking the loss and moving out of the way is the best choice. We have CPI tomorrow and possible nice large down day which will pump the premiums in your spread with 2 days to expiration.

The key is to go through your analysis long before we get this close. So you can react calmly and smoothly without the stress :).
 
I commit to the partial hedge usually for as long as I have my credit spread open otherwise I would be trying to time when to profit from the hedge or not and get whipsawed. I would only take it off if I saw strong support and felt the puts were not needed and I had a nice profit. Or I might take it off if there is a profit and we are close to expiration and my credit spreads seem safe.

However, for the most part I leave it on as a sunk cost to do its job :)
 
Coach,
I'd be interested in what adjustments you are considering, and the timing of those adjustments. I have the 1205/1195 spread. Would you consider adding a debit spread above your short strike? Or just roll down the position? I'm hopeful that we won't go down 30pts in 2days + SET, but really who knows. What would you feel is the next support level as well?

Thanks,
Burr.

Quote from optioncoach:

I have the 1195 short strike for now and will hold for the next few days. I might consider adjustment if we get to 1220 or below depending on the timing. More interested in seeing what numbers come out in the next day or so and the market reaction to if....
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Well I still have my JUN SPY 121 Puts as a partial hedge so I am not jumping the gun yet. Right now it seems 1230 support keeps holding even though it is getting poked and I would want it to hold all day today until the close for me to feel safe for today. For me 1220 is 25 points away and that is when I would consider rolling the 1195 down to 1190 for a little extra room given we would be 1 or 2 days from expiration.

I alreayd banked some profits from the calls so I have no problem using them to absorb some of the cost of the adjustment. That plus any profits from the 121 Puts.

So my first inclination depending on how or if we drop today or tomorrow is to adjust another strike down for some cushion. With 2 days left I just want to stay ahead since 1200 is a round number level of support. I also see 1220 as another level of support on the measured move out of the bear flag the SPX formed on the drop and pullback to 1290.

So 1230 for today and 1220 and 1200 as near-term support levels for protection of my 1195 strikes. First steps will be to roll down 1195 strike if needed. Rolling into a butterfly is not high on my list right now since the debit will be high and I might lose less if I just close or adjust over the FLY where I would be hoping for a lottery ticket gain.

I will know better based on today's close and reaction to tomorrow.
 
It's been a pretty tough month all around. I cant imagine the average premium seller having an easy time through this selloff unless they only sell the call side. Good reason why reducing -greeks exposure on the put side or completely taking it out of your trading is a good idea to consider.

Just something to think about.
 
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