SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
You might also experiment with wider strikes. Haven't looked into this as much as I would like, but wider strikes on the diagonals seem to lessen the effects of a drop in IV.
Yesterday I rolled:
XEO: 570/565 bull puts to 560/555 taking a loss of .95 per spread.
I opened these when the market was oversold and starting to move up, BUT the overall short term trend was down.
Lesson learned: Even if the market is oversold and moving up, do not open just OTM bull put spreads in the direction of the trend.
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For June, I had opened twice the number of bear call spreads as I have bull put spreads. So, I am still positive for the month.
May close bull puts on a bounce up tomorow. No SET to worry about.....................
XEO: 570/565 bull puts to 560/555 taking a loss of .95 per spread.
I opened these when the market was oversold and starting to move up, BUT the overall short term trend was down.
Lesson learned: Even if the market is oversold and moving up, do not open just OTM bull put spreads in the direction of the trend.
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For June, I had opened twice the number of bear call spreads as I have bull put spreads. So, I am still positive for the month.
May close bull puts on a bounce up tomorow. No SET to worry about.....................
Here is a trade I like to share with you:
Yesterday 6/13/06 when the DIA was 108.10 I sold the July 105 â99 Bull Put Spread for a credit of .80
When I saw the DIA continued to go down I bought The following Butterfly Put spread for protection
106- 102- 98 for a debit of .50 when the DIA was 107.35 (almost bought it close to the ask, hard to get the Mid on butterflies ) Total net credit 30C.
my profit window on the combined position: as long as The DIA closes at $101.5 or above on July expiration Iâm profitable.
Profit range = between 30 - 1.30$ on each contract depends where the DIA settles.
Maximu risk = $ 570
Return on the money 5% - 22% monthly
What are the odds for profit = extremely high
The DIA has to go down 7 points (Till 7/21/06) from todayâs close 108.33 till my position becomes dangerous . Since January/03 till May/06 the biggest point loss for DIA between settlements was $ 5.87 on 2/21/03 and the second biggest loss was 4/15/05 loss of $5.26.
On the other hand any thing these days is possible, but the odds are in my favor.
The market is nothing but a big game. A game of numbers and odds. Play only when the odds are on your side and on the long run you will be a winner.
Labib Imtanes
Yesterday 6/13/06 when the DIA was 108.10 I sold the July 105 â99 Bull Put Spread for a credit of .80
When I saw the DIA continued to go down I bought The following Butterfly Put spread for protection
106- 102- 98 for a debit of .50 when the DIA was 107.35 (almost bought it close to the ask, hard to get the Mid on butterflies ) Total net credit 30C.
my profit window on the combined position: as long as The DIA closes at $101.5 or above on July expiration Iâm profitable.
Profit range = between 30 - 1.30$ on each contract depends where the DIA settles.
Maximu risk = $ 570
Return on the money 5% - 22% monthly
What are the odds for profit = extremely high
The DIA has to go down 7 points (Till 7/21/06) from todayâs close 108.33 till my position becomes dangerous . Since January/03 till May/06 the biggest point loss for DIA between settlements was $ 5.87 on 2/21/03 and the second biggest loss was 4/15/05 loss of $5.26.
On the other hand any thing these days is possible, but the odds are in my favor.
The market is nothing but a big game. A game of numbers and odds. Play only when the odds are on your side and on the long run you will be a winner.
Labib Imtanes
I will not touch July until after expiration but in general on the put side, I will try and get 1130 or lower.
However with time passing I doubt I will get any premium there. July might be a tough month to get some premium so I will wait until Friday or Monday to see if I even grab anything for July.
However with time passing I doubt I will get any premium there. July might be a tough month to get some premium so I will wait until Friday or Monday to see if I even grab anything for July.
andy,
the way i see it is this and that's why i kept saying earlier that IV increasing environment hurts the premium seller. I will bundle the naked and covered writes together to make it simple, and because they are both premium sellers.
When you sell premium(covered or naked), you dont want the vega to expand on you any more than you want the delta to expand on you(market gets closer to your short strike). When you buy premium, the opposite is true. When i see increasing IV i mean an increase while in the position(between the time you buy it and the time you close/adjust/roll). The wider the distance of the covered write strikes the more the pain caused by the iv spike. (in the case of a credit spread trader) I dont care if i am selling low vol or high vol(though i prefer high vol) as long as it doesnt expand on me once in the position. When you have an increasing iv environment, chances are it WILL expand on you once in the position(just look at what happened in june to many FOTM positions, with 20 points OTM and 2 days to go they were priced at 400-500% loss), especially if you are selling put premium unless you manage to perfectly time the bottoms.