SPX Credit Spread Trader

Okay, so the 100 points was a bit high, but I'm seriously considering it for my retirement account. Also, I think it will be possible to put somewhat more margin at risk than I would in my regular account. Say 50 to 60% total at any one time (my regular account is about 33%). I would have 30% in the second month and 30% in the third month. So, if I start with June options, then in the middle to end of May I'll start looking at July options and so on. At the end of the year, I may not trade at all given the Santa Claus rally.

If I start doing this, I'll report it monthly separate from my other trades, so we can see how I do.


Quote from optioncoach:

Ahh now we are at 80 points in 2 months. SPX moved about 100 points from OCT 05 lows to DEC 05 highs.

Nothing is a given really. Calls may not be subject to black swan crashes but they are still at risk for strong rises, especially over 2 months.

Moreover, if you only do 2 month spreads, you will only have about 6 positions in a year, which cuts that 18% return in half before commissions and not counting a potential adjustment.

All I can say is it is hard to generalize an approach with this strategy. Drops are more of a panic and fear than rises but both still present risks. The more time you add the more time for the market to move against you.

You could certainly stick with calls but the IV skew works against you a bit in trying to go deep OTM. Makes it harder to go 100 points OTM like puts but then market drops can be quick and severe with puts. It is a trade off where no cookie cutter can be applied.
More...
 
I tried grabbing more put spreads today with the downdraft but couldn't get filled this morning. I was looking at 1215/1225 this morning at .45 but it dropped like a stone mid-morning. Premium has been dried up since then even up to 1245.

Right now 1240/1250 mid is .60, 1235/1245 mid is .25. I'd rather be down under 1240 if I can get it with a worthwhile premium.

ryan
 
Quote from ryank:

I tried grabbing more put spreads today with the downdraft but couldn't get filled this morning. I was looking at 1215/1225 this morning at .45 but it dropped like a stone mid-morning. Premium has been dried up since then even up to 1245.

Right now 1240/1250 mid is .60, 1235/1245 mid is .25. I'd rather be down under 1240 if I can get it with a worthwhile premium.

ryan
More...

just a suggestion...you might wait until tomorrow am, often when we get a fairly strong negative move there is follow thu at least first thing in the am...I could be totaly wrong of course:p
 
Quote from optioncoach:

Today really is not that negative though....
More...

I was trying to get filled when we were down about 6 this morning and it didn't happen, we are now taking another dip but not far enough to get back to where the premium was this morning. Tomorrow is another day :D

Edit: the thing that bugs me is that the mid on my current 1210/1220 position is .25, the mid on 1235/1245 is .25. :mad:

ryan
 
Andy,

This is what I have been trying to work out over the last few months. Black Swans concern me quite a bit, but I am still trying to complete the IC each and every month. I have about $120k I put up for margin every month (not including my reserves for adjustments). In order to make my monthly nut, I need to play both sides fully. However, as you pointed out, once my margin is $240k I should be able to just play the call side and put my mind more at ease. In fact, I could probably slowly scale back the put side until I am comfortable with the risk/reward.

I doubt I will ever completely get away from the put side, but I would like to reduce some of the risk.

-Cash



Quote from andysmith:

Donna -- occasionally I am, more on the call side than puts. Working out OK. It can cut down on returns but I've become much less greedy than when I started out, so it's not a problem. It's kinda like this: say your margin is $100k. You'd like to make $10k/month. Now say you grow your account such that your margin is $200k... hey presto! You're still ok with around $10k/month and less risk... funny how that works. The flip side of this is that when one has an account value of say, $5k, they want to grow it to $100k in a year. That's close to impossible!
More...
 
Murray:

Re Diagonal Calendars.

This is not the way they are supposed to be traded but I have been having some good luck/fun scalping the short side. As you rememebr from my last lucky story scalping the short leg of the diagonal spread for $2000 or so I was left with 10 long JUNE SPX 1375 Calls.

Well today on earlier moves higher I sold 5 MAY 1345 Calls and bought them back when they dipped. I did it again on the late surge in the market towards the end of the day selling 5 1345 Calls and bought them back right after 4:00 for $300 scalps today. I would not recommend this approach but just using my intraday signals for ES I was getting in and out LOL.

I sold 5 so that if the market moved higher I had a 5*10 spread and could sell more calls when I needed to. I have just had good swings to scalp the short side and will keep doing it all month long if the market lets me lol.

Anyway, just though I would share this unintentional way to trade the diagonal spread :D
 
You must log in or register to reply here.
Back
Top