SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Quote from optioncoach:
Of course after I closed my calls at 1.05, the reversed and moved back higher and the calls are at 1.40 nowlol
YOU had a GREAT trade...MOVE on...
Quote from RichardRimes:
Ryan...I'd be very careful with an OCT 1275 short, remember last year and most every other year. I know the diag is great when it does get close to the short and IV would certainly increase...however we could run totally past that short and 1250 in OCT. I certainly wouldn't close your spread just yet....give it until next week. Of course I'm sure you remember well my advise last monthI still owe you a drink from that:eek:
The 1275 is a bit close but it is a little more than 1 SD outside of the market currently and could be a support area in looking at the chart. The current breakeven is about 1267 on the downside but this would move lower as the vol would increase on a downward move (unless we slowly bleed down then it might be a different ball game in regards to vol). Going to Oct 1250/Nov 1225 isn't bad either, more breathing room that way
.On the upside my breakeven is right at 1 SD, might need to revisit that. Beige book comes out next week so that could affect things too, will wait and see. Don't have the margin to do this right now but just checking it out.
Don't forget that stdev is partly based on historical volatility which has been very low. This compresses what you see as +1 and -1 sigma. If/when the market activity picks up in Sept, what looked like a good 1 sigma bet in August may change quickly.
This may be particularly problematic for a 1275 short put.
This may be particularly problematic for a 1275 short put.
NEW CALL DIAGONAL POSITION
Sold 135 SEP EW 1340 Calls @ 6.50 ($43,875 Credit)
Bot 150 OCT ES 1360 Calls @ 5.25 ($39,375 Debit)
Net Credit = $4,500
Max Theoretical Risk = $150,000
Current Return on Risk = 3%
ANALYSIS
1340 is the year high for S&P futures and we already have had an impressive run up from Summer lows. I think we will move sideways most of September or at worst test the highs but I do not forsee us making new highs on strength, especially with a 9/20(date?) Fed meeting looming in 3 weeks and lots of traders coming back from vacation after a move higher on lighter volume. Maybe they will profit take or churn the market for the next 2 weeks.
If the market does push higher over the next week or so, I can sell another 15 SEP calls and push the credit higher.
Sold 135 SEP EW 1340 Calls @ 6.50 ($43,875 Credit)
Bot 150 OCT ES 1360 Calls @ 5.25 ($39,375 Debit)
Net Credit = $4,500
Max Theoretical Risk = $150,000
Current Return on Risk = 3%
ANALYSIS
1340 is the year high for S&P futures and we already have had an impressive run up from Summer lows. I think we will move sideways most of September or at worst test the highs but I do not forsee us making new highs on strength, especially with a 9/20(date?) Fed meeting looming in 3 weeks and lots of traders coming back from vacation after a move higher on lighter volume. Maybe they will profit take or churn the market for the next 2 weeks.
If the market does push higher over the next week or so, I can sell another 15 SEP calls and push the credit higher.
Coach:
Hope you don't mind but a couple of newbie questions:
How does the ES and EW futures equate to SPX. Since I do not trade futures yet, I am curious to follow your trades with similiar positions on the SPX.
Also, how did you manage to obtain the initial credit. Did you leg into the position or placed it as a spread. What would be a similiar strike selection for the SPX.
Thanks in advance for your answers.
Quote from optioncoach:
Of course after I closed my calls at 1.05, the reversed and moved back higher and the calls are at 1.40 now
1. Did you follow your trading plan?
2. If so, do you want to change your trading plan for such situations?
Sounds to me that you are upset with yourself because you cannot guess market reversals.