SPX Credit Spread Trader

[B5476]

Has anyone ever seen a study of the maximum spread between the closing value of the SPX on Thursday before opex and the $SET number that comes out the following Friday at mid-day? I am aware there can be significant differences between the closing value on Thursday, the opening value of the SPX the next day, and the $SET number that is available during the day Friday.

I know that many people advocate just closing the IC positions to avoid having to sweat the $SET, but that is expensive and may be overly conservative if one has wide margins on both sides of the position.

 

[RichardRimes]

B5476 most of us have been on the pos and neg sides of set...gen rule of thumb is if you are within 10pts...close

 

[rdemyan]

B5476:

I started looking at this last November. I got too busy to keep up the spreadsheet that I've posted. It's a start. I don't remember if the "Close" listed is the Thursday or Friday close. Should be easy to determine, but I've had a few glasses of wine and just don't feel like doing research tonight. Would appreciate it if you could check a couple of months on the 'Close' to determine if it was the Friday or Thursday close.

Quote from B5476:

Has anyone ever seen a study of the maximum spread between the closing value of the SPX on Thursday before opex and the $SET number that comes out the following Friday at mid-day? I am aware there can be significant differences between the closing value on Thursday, the opening value of the SPX the next day, and the $SET number that is available during the day Friday.

I know that many people advocate just closing the IC positions to avoid having to sweat the $SET, but that is expensive and may be overly conservative if one has wide margins on both sides of the position.

 

[rdemyan]

OK, Donna:

Here's the quo for my silence.

You mentioned earlier that your legs are still, was the term 'hot'. So how about a picture?

But I need to have some assurance that it's really you. So, maybe have a piece of paper in the picture that says "SPX Credit Spread Trader".

Quote from DonnaV:

got quid

 

[rallymode]

Quote from rdemyan:

I think Mav hit on the head when he said something to the effect that there is no preordained reason to hold a credit spread till expiration.

I hold all my SPX credit spreads to expiration. And it isnt because this is china but because its what my strategy is based around. There are times when you should close and times when you should let it expire, it comes down to anticipated return vs risked capital. Saying you should always close when you've gotten most profit out of it sounds like something Cramer would say.

Quote from volatilitypimp:

I have roughly 4 calendars and 2 IC's on per month, and I am the exact same way. My spx ic is giving me heartburn at the moment, but my CME ic is giving me an ulcer.

Not trying to nitpick but if you are in a trade that's giving you this kind of a feeling, you are either in the wrong trade or using the wrong size. Either one is detrimental to your long term survival.

 

[rdemyan]

I don't think I said that you should always close, I just think that trying to save a nickel or a dime shouldn't override getting out of the way of an on coming train. I think what happens sometimes is that since the credit for FOTM spreads is relatively low, there is a tendency to want to hold on till the end. Just my opinion, as your opinions are yours.

Quote from rallymode:

I hold all my SPX credit spreads to expiration. And it isnt because this is china but because its what my strategy is based around. There are times when you should close and times when you should let it expire, it comes down to anticipated return vs risked capital. Saying you should always close when you've gotten most profit out of it sounds like something Cramer would say.

 

[rallymode]

Quote from rdemyan:

I don't think I said that you should always close, I just think that trying to save a nickel or a dime shouldn't override getting out of the way of an on coming train. I think what happens sometimes is that since the credit for FOTM spreads is relatively low, there is a tendency to want to hold on till the end. Just my opinion, as your opinions are yours.

I understand what you are saying, but my comment ties to an earlier question by donna regarding being more precise with debits vs credit. Iff you hold through expiration then yes, being in debits requires a more precise outlook on where the underlying will end up vs being in credits.

 

[nlslax]

Quote from volatilitypimp:

I have roughly 4 calendars and 2 IC's on per month, and I am the exact same way. My spx ic is giving me heartburn at the moment, but my CME ic is giving me an ulcer. Whereas my calendars are curently getting better yields than otm credit spreads. Oh well, gotta mix it up.

Good point, u gotta mix it up. Did many, maybe too many over the past 30 days. Got 18 positions expiring by Friday with only 2 of them being credits. Did a Calender on the APR/MAY SPX 1310 Calls. Monitoring it, but not stressed like I would be if it was a credit spread.

 

[B5476]

Quote from rdemyan:

B5476:

I started looking at this last November. I got too busy to keep up the spreadsheet that I've posted. It's a start. I don't remember if the "Close" listed is the Thursday or Friday close. Should be easy to determine, but I've had a few glasses of wine and just don't feel like doing research tonight. Would appreciate it if you could check a couple of months on the 'Close' to determine if it was the Friday or Thursday close.

Thanks for the spreadsheet. I looked at the last couple of years data (my wine had already worn off since I had started drinking early), and you were clearly recording the SPX value for the Thursday close. So, as I see it, over the date range you studied, the difference between Thursday close and SET ranged from 1 to 45. If you exclude September 2001, the range tightens to 1 to 26.

Thanks for the spreadsheet. That helps put some sort of framework around decisions.

 

[rdemyan]

Good. I'm glad it was Thursday. That's what I thought, because it wouldn't make as much sense to do the Friday close.

Quote from B5476:

Thanks for the spreadsheet. I looked at the last couple of years data (my wine had already worn off since I had started drinking early), and you were clearly recording the SPX value for the Thursday close. So, as I see it, over the date range you studied, the difference between Thursday close and SET ranged from 1 to 45. If you exclude September 2001, the range tightens to 1 to 26.

Thanks for the spreadsheet. That helps put some sort of framework around decisions.