SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Yes, that seems a bit high LOL
I have setup a real estate LLC in the past. All income passed thru to us and we paid taxes individually and wrote off expense on the corporate level. I can only assume it is very similar if not the same with trading equities.
If you are serious about doing it and dont have the time to do the research yourself, you can get an agent to set it up for you. Isn't Phil an attorney? Maybe he can help you out.
Doing it yourself will probably cost you no more than a couple of grand, including all the legal stuff.
He was dumbing it down for my benefit 
I understand that a volty jump will benefit the long backmonth more than it hurts the short frontmonth. But if the market opens up 30 points below your long, you are still facing a loss of almost the full width of your diagonal spread. Certainly the vol boost helps the diagonal, while it does very little for the vertical credit spread. But is it enough to prevent a wipeout of your account?
I understand that a volty jump will benefit the long backmonth more than it hurts the short frontmonth. But if the market opens up 30 points below your long, you are still facing a loss of almost the full width of your diagonal spread. Certainly the vol boost helps the diagonal, while it does very little for the vertical credit spread. But is it enough to prevent a wipeout of your account?
Quote from ryank:
The first post by riskarb that I understood without having to reread it!
Quote from jeffm:
He was dumbing it down for my benefit
I understand that a volty jump will benefit the long backmonth more than it hurts the short frontmonth. But if the market opens up 30 points below your long, you are still facing a loss of almost the full width of your diagonal spread. Certainly the vol boost helps the diagonal, while it does very little for the vertical credit spread. But is it enough to prevent a wipeout of your account?
The risk is proportional to strike-width and stat volty. A diagonal will always incur less risk when exposed to a vol-shock. The vertical is a play on distro; the diag is a play on vol. The vertical is short on both distro[gamma] and vol[vega]. You'll do better in the vertical away from your strike, but there are many other positions which are favored over the vertical.
Quote from jeffm:
He was dumbing it down for my benefit
I understand that a volty jump will benefit the long backmonth more than it hurts the short frontmonth. But if the market opens up 30 points below your long, you are still facing a loss of almost the full width of your diagonal spread. Certainly the vol boost helps the diagonal, while it does very little for the vertical credit spread. But is it enough to prevent a wipeout of your account?
Take a look at a 10 lot Sep 1225p/Oct 1200p diagonal. Cost at mid right now is $2.85.
Assume market opens at 1175 tomorrow, how high will vol go? Let's say 10 points to about 24 (anybody's guess). Your loss would be around $3500. If vol jumps up about 14 points to 28 (hey, about 100 point drop in one day you would think vol would jump at least this high) you are at about breakeven. Not sure what the chances are for getting filled and how far from the mid though.
Question for the board -
A while back I would sell credit spreads on the SPX but gave it up due to liquidity frustrations. I simply could not get filled even after shaving off anywhere from .10 - .25 off the mid at times.
I've been looking at index spreads again, particularly the RUT. Will I be facing the same liquidity issues here or has it improved? I see most of you trade SPX, so any info onthe RUt would be appreciated.
Thanks!
A while back I would sell credit spreads on the SPX but gave it up due to liquidity frustrations. I simply could not get filled even after shaving off anywhere from .10 - .25 off the mid at times.
I've been looking at index spreads again, particularly the RUT. Will I be facing the same liquidity issues here or has it improved? I see most of you trade SPX, so any info onthe RUt would be appreciated.
Thanks!