SPX Credit Spread Trader

The only problem with VEGA on SPX diagonals is that IV is very low and does not move that much. I think of it as a VEGA play on stocks perhaps where I can get nice skews and crushes.

As for SPX I played it as I do the spreads when selecting strikes except I am more agressive with the diagonals. I got out of the APRIL/MAY for a nice small profit which is close to what it might be worth now I guess with the drop lately lol.

I had a great day trading the diagonal unintentionally lol. Here is the total recap of what happened today.

I was legging into a 40*50 MAY 1345/JUNE 1375 call Diagonal Spread. I grabbed 40 of the 1345 at $3.70 and had an order to buy 50 of the JUNE 1375 calls at $2.80.

I got filled on the MAY calls and only filled on 10 of the JUNE calls. Shortly thereafter the market starting falling and my 40 $3.70 MAY Calls were bought back for $3.40, a $0.30 profit or $1,200.

After the market went back a little higher I sold 9 MAY 1345 Calls to go with my partial fill of 10 JUNE 1375 Calls for a smaller diagonal and got filled at $3.40.

Well the market started falling again and I bought back the 9 Calls for $2.50, a profit of $0.90 or $810.

So, although it was not my intent, nor could I have timed the market as well if I tried, but I made $2,010 today "swing" trading the short calls in the diagonal and still have 10 JUNE 1375 Calls @ $2.80 or about $0.80 if you count the short call profits LOL.

If the market moves back higher I will sell calls again in MAY or see what I can do with my JUNE call. Pretty funny and quite fortuitous (landing in your lap k ind of luck but not complaining).

So not the normal or orthodox way to trade a diagonal but when it happens....... daaaaaaaaaaaaaaaaaaaaaaaaaamn!



Quote from Sailing:

Phil,

lol Keep working the Diagonal entry. Think more about VEGA, rather than THETA or DELTA, on this entry. Position your analysis around VEGA.

Phil, did you check out the value of your April diagonal position this afternoon.... :)

Is anyone making money trading Straddles? It's been a great earning season so far!
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CBOE definition of SET:

Settlement of Option Exercise:
The exercise-settlement value, SET, is calculated using the opening (first) reported sales price in the primary market of each component stock on the last business day (usually a Friday) before the expiration date. If a stock in the index does not open on the day on which the exercise & settlement value is determined, the last reported sales price in the primary market will be used in calculating the exercise-settlement value. The exercise-settlement amount is equal to the difference between the exercise- settlement value, SET, and the exercise price of the option, multiplied by $100. Exercise will result in delivery of cash on the business day following expiration.
 
Coach:

If I'm understanding you correctly, while you were legging in, you sold 40 may 1345 SPX calls, right. Wasn't the margin on that, like, really high since it was a naked position. Or is this where that "haircut" thing comes into play.

Quote from optioncoach:

The only problem with VEGA on SPX diagonals is that IV is very low and does not move that much. I think of it as a VEGA play on stocks perhaps where I can get nice skews and crushes.

As for SPX I played it as I do the spreads when selecting strikes except I am more agressive with the diagonals. I got out of the APRIL/MAY for a nice small profit which is close to what it might be worth now I guess with the drop lately lol.

I had a great day trading the diagonal unintentionally lol. Here is the total recap of what happened today.

I was legging into a 40*50 MAY 1345/JUNE 1375 call Diagonal Spread. I grabbed 40 of the 1345 at $3.70 and had an order to buy 50 of the JUNE 1375 calls at $2.80.

I got filled on the MAY calls and only filled on 10 of the JUNE calls. Shortly thereafter the market starting falling and my 40 $3.70 MAY Calls were bought back for $3.40, a $0.30 profit or $1,200.

After the market went back a little higher I sold 9 MAY 1345 Calls to go with my partial fill of 10 JUNE 1375 Calls for a smaller diagonal and got filled at $3.40.

Well the market started falling again and I bought back the 9 Calls for $2.50, a profit of $0.90 or $810.

So, although it was not my intent, nor could I have timed the market as well if I tried, but I made $2,010 today "swing" trading the short calls in the diagonal and still have 10 JUNE 1375 Calls @ $2.80 or about $0.80 if you count the short call profits LOL.

If the market moves back higher I will sell calls again in MAY or see what I can do with my JUNE call. Pretty funny and quite fortuitous (landing in your lap k ind of luck but not complaining).

So not the normal or orthodox way to trade a diagonal but when it happens....... daaaaaaaaaaaaaaaaaaaaaaaaaamn!
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I'm new to this forum, and was wondering if someone could give a recommendation on what they consider an adequate amount of capital to implement credit spreads, or Iron condors on the SPX. From what I've read on this form so far it seems many are working with a lot size of 25 or higher, is this strategy adequate for lot size of 5 with a 10 point spread.
 
This was a prop shop trade so no real margin requirement until I covered it with the longs or the market closed. Intraday margin is pretty much open in these cases. So I could leg into it.




Quote from rdemyan:

Coach:

If I'm understanding you correctly, while you were legging in, you sold 40 may 1345 SPX calls, right. Wasn't the margin on that, like, really high since it was a naked position. Or is this where that "haircut" thing comes into play.
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Quote from Shams78:

I'm new to this forum, and was wondering if someone could give a recommendation on what they consider an adequate amount of capital to implement credit spreads, or Iron condors on the SPX. From what I've read on this form so far it seems many are working with a lot size of 25 or higher, is this strategy adequate for lot size of 5 with a 10 point spread.
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Depends on what your commissions are.

{edit} It will also depend on your strike selection.

{edit again} Sorry didn't notice that you'd specified 5-10 point spreads. In that case, yes it would be fine.:)
 
You could do credit spreads with $10,000 but the credits would be real small and you would need deep deep discount options commisions to make it work. But some people here have done 10 spreads on a 10-point wide set of strikes for $400 in credit, for example, and small commissions. It is harder to add partial hedges or roll since the amount is so small but it is not impossible, just more difficult in some ways.

Also I would not recommend a small acount put all its funds into thse strategy. If someone had only $10,000 total, I would not recommend doing this solely, although you could.

Quote from Shams78:

I'm new to this forum, and was wondering if someone could give a recommendation on what they consider an adequate amount of capital to implement credit spreads, or Iron condors on the SPX. From what I've read on this form so far it seems many are working with a lot size of 25 or higher, is this strategy adequate for lot size of 5 with a 10 point spread.
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Welcome to the forum:

Yeah, there are a couple of really well capitalized individuals here who shall not be named (Donna, Coach, etc).

I typically place a lot size of 10 with a point spread of 10 to 15 points.

Have you read through the posts? Coach really stresses risk management. I wish I had been part of the forum before I blew up my account (25% loss on my entire portfolio). Although our posts from the last couple of months would certainly give the impression that credit spreads are "easy money", the risk can be very high if you don't implement good risk management. Highly recommend that you take the time to at least scan Coach's posts. He talks about every important subject there is, regarding SPX credit spreads, anyway. Oh yeah, and you might enjoy the JA pics as well (although she's not really my type).

Quote from Shams78:

I'm new to this forum, and was wondering if someone could give a recommendation on what they consider an adequate amount of capital to implement credit spreads, or Iron condors on the SPX. From what I've read on this form so far it seems many are working with a lot size of 25 or higher, is this strategy adequate for lot size of 5 with a 10 point spread.
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