SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Rally,
I actually placed a Donna positions when I enterd the Call Side.
This means I legged into the put on the downside. But in general, as you pointed out, the Put side is difficult if not impossible to put on for EVEN.
The call side is tricky. As you pointed out, getting in for even or for a small credit and the appropriate distance is a matter of the current volatility skew. I have found that the OEX has been a better fill risk/reward than the SPX.... but that can change.
My goal is to ratio the upside for even or better, with littleo to know risk if the market takes off. This can be accomplished.
For example: Recently I bought 10 May 625c and sold 4 Apr 605c and then sold 6 addition April 625c. What is nice here... is the margin requirement is only for the 4 short positions sold at 605.
The positions risk graphs looks like an unbrella... which can be adjusted.
As coach pointed out.... in his positon, as the market moves up... to the short positions.... this is maximum profit... and you have break even potential beyond the short. I would certainly attempt to hold the positon to as close to expiraton as possible.... the preimium really bleeds out the last week... while the long has potential to increase in VEGA without the shorts having much effect.
In summary... the Diagonal... is a VEGA play... yet, gives you profit potential through large range.... and 'black swan' protection.
Murray
I actually placed a Donna positions when I enterd the Call Side.
This means I legged into the put on the downside. But in general, as you pointed out, the Put side is difficult if not impossible to put on for EVEN.
The call side is tricky. As you pointed out, getting in for even or for a small credit and the appropriate distance is a matter of the current volatility skew. I have found that the OEX has been a better fill risk/reward than the SPX.... but that can change.
My goal is to ratio the upside for even or better, with littleo to know risk if the market takes off. This can be accomplished.
For example: Recently I bought 10 May 625c and sold 4 Apr 605c and then sold 6 addition April 625c. What is nice here... is the margin requirement is only for the 4 short positions sold at 605.
The positions risk graphs looks like an unbrella... which can be adjusted.
As coach pointed out.... in his positon, as the market moves up... to the short positions.... this is maximum profit... and you have break even potential beyond the short. I would certainly attempt to hold the positon to as close to expiraton as possible.... the preimium really bleeds out the last week... while the long has potential to increase in VEGA without the shorts having much effect.
In summary... the Diagonal... is a VEGA play... yet, gives you profit potential through large range.... and 'black swan' protection.
Murray
Quote from rallymode:
This started looking to me like it was too good to be true and as i know there are no free lunches i did further research to find the problem. Now it appears that getting a 30-35 point spread at a 10:5 long to short ratio is clearly an arbitrage. That is the only position that will give you profit at or beyond your long strike.
Sailing -> you say you have this position at breakeven:
10 May 1190 Puts
- 5 Apr 1225 Puts
Hold onto it cuz you CANNOT lose no matter where the market ends at APR expiration.
If you were to liquidate today even at the bid and ask you will make $.75 credit.
If i were to buy your position today and split the Bid/Ask, the best i can do is a debit of $1.3. I dont see how you placed that trade at breakeven two weeks ago. Could it be a typo and you meant 7 short puts instead of 5? Or maybe you have 10 shorts and 5 longs since the may 1190 put price is twice the 1225 put price.
The best i see possible is a 10:7 ratio on a 30-35 point spread and that will need adjustments with the SPX between your strikes.
Anyone else see the same thing?
PS If my math is off, excuse me, its kinda late and i should've had less coffeee today
I tried to sell 1330/1335 call and ask for 30 cents off the mid price and did not get filled.
Same thing to 1330/1340 call :-(
TOS customer support "hja" refused to call the floor to ask the actual price for me :-(
[EDIT] Finally, I sold 1335/1345 for $0.95 and shaved 20 cents off the mid ($1.15). The 1330/1335 had mid $1.20 at one point but I did not get filled. Now I'm leaving it at $0.80
-Nick
Same thing to 1330/1340 call :-(
TOS customer support "hja" refused to call the floor to ask the actual price for me :-(
[EDIT] Finally, I sold 1335/1345 for $0.95 and shaved 20 cents off the mid ($1.15). The 1330/1335 had mid $1.20 at one point but I did not get filled. Now I'm leaving it at $0.80
-Nick
This is a good example of when it might be useful to use the XSP/SPY to figure out what a reasonable limit would be. Today the quoted mid price was generally inflated because the spreads were large.
If I were trying to get filled on a 1330/1340 I could almost certainly get filled on SPY at the equivalent of $1.50, so I wouldn't go lower than 1.50 on SPX. But I would be looking for closer to 1.60-1.65. If they wouldn't give it up on SPX for at least 1.50 credit, then it is worth it to pay higher commiss and go for XSP and get a better fill.
Hi Nick...welcome back...everyone has had some trouble getting fills on the spx this month....you don't think 1330 or 1335 as a short cutting it a little close?
1330..... ouch....
Not much strength to the market really past the 1310 high but all it takes is one small catalyst and look out above. Remember we are coming into earnings season I believe for the S&P so we might get some action. Stay alert....
Not much strength to the market really past the 1310 high but all it takes is one small catalyst and look out above. Remember we are coming into earnings season I believe for the S&P so we might get some action. Stay alert....
Agreed. I'm in a 1340/1350 and staying on my toes. If we get up to 1330 I plan on adjusting.
Coach,
Those diagonal spreads sure behave differently than the credit spreads.
It really shows how the Calendar vs. Vertical is a completely different beast. When I look at the Diagonal (calendar) it's all about volatility... at least on a daily basis. Again... this is a wait until expiration kind of trade.
Fun to follow...
Murray
Those diagonal spreads sure behave differently than the credit spreads.
It really shows how the Calendar vs. Vertical is a completely different beast. When I look at the Diagonal (calendar) it's all about volatility... at least on a daily basis. Again... this is a wait until expiration kind of trade.
Fun to follow...
Murray