SPX Credit Spread Trader

[rallymode]

Quote from andysmith:

Software to show risk graphs and their dependencies on greeks, underlying, etc... like OptionVue

Oh, i really dont use any of that anymore. Once i determine where i expect the underlying to move or end up at expiration i kinda see the graphs in my head. I have been doing this for a long time now so all i need is an option chain with greeks. Besides i dont do complicated combos or delta neutral trades, mostly debit/credit spreads, calendars and FLYs.

Now if you meant an options scanner, thats a diff question. I use IB's scanner plus a few others to seek IV trades, the only time when i have a strategy in mind before i even have a stock in mind.

 

[BoSox1962]

Greetings Folks, \

I have been follwoing this thread (occassionaly contributing) for a few months. So far, March & April have been good results, both months all spreads expired worthless (SPX & OEX). I've learned a lot by following the commentary & hope to continue. High level strategy is similar to Coach's, 30 - 40 days out, ~70 points OTM.

I'm still a cutting teeth when it comes to hedging (when to do & where), meaning once the index (assuming I'm trading the SPX) gets 10-15 pts within my short strike, I typically look to the SPY to hedge. I would welcome some of your commentary on how best to react to a move toward your short strike (i.e. what options or actiosn you consider to hedge you earlier spread)

May positions:

MAY 1210/1225 p, .95 credit, 4/12
MAY 1195/1215 p, .70 credit, 4/17

MAY 1345/1350 c, .70 credit, 4/18
MAY 1350/1360 c, .65 credit, 4/24

 

[rallymode]

Quote from optioncoach:



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.

Coach,

i know your post is just informative and you clearly state it was luck but i really hope that some newer traders who are giving your strategy a try arent swayed into thinking this is a better way to trade.

The fact that you day trade(based on whether u r successful at that endevour) puts you at the distinctive position to take advantage of short term reversals(according to whatever signals you use) and allow you to maybe scalp a few points but to a new trader this really isnt any better.

What you are doing is in fact equivalent to putting all legs on at the same time and scalping the ES in a different account. Trying to scalp one of the sides or even move in and out will certainly confuse a novice as they are as likely to lose as it is to gain from it to say the least. Even worse, it might give a false sense of security that since its a part of a bigger spread, its ok to perhaps lose a point or two. Over the long term, it really adds up.

Anyway, not trying to put down your trades, just giving them a different perspective.

 

[El OchoCinco]

I cannot imagine how any novice could read my posts and assume they could scalp a diagonal the way I did given the way I described it...

Novices must take responsibility for their own actions and not blindly follow someone with more experience who describes a lucky scalp.

Quote from rallymode:

Coach,

i know your post is just informative and you clearly state it was luck but i really hope that some newer traders who are giving your strategy a try arent swayed into thinking this is a better way to trade.

The fact that you day trade(based on whether u r successful at that endevour) puts you at the distinctive position to take advantage of short term reversals(according to whatever signals you use) and allow you to maybe scalp a few points but to a new trader this really isnt any better.

What you are doing is in fact equivalent to putting all legs on at the same time and scalping the ES in a different account. Trying to scalp one of the sides or even move in and out will certainly confuse a novice as they are as likely to lose as it is to gain from it to say the least. Even worse, it might give a false sense of security that since its a part of a bigger spread, its ok to perhaps lose a point or two. Over the long term, it really adds up.

Anyway, not trying to put down your trades, just giving them a different perspective.

 

[RichardRimes]

Quote from BoSox1962:

Greetings Folks, \

I have been follwoing this thread (occassionaly contributing) for a few months. So far, March & April have been good results, both months all spreads expired worthless (SPX & OEX). I've learned a lot by following the commentary & hope to continue. High level strategy is similar to Coach's, 30 - 40 days out, ~70 points OTM.

I'm still a cutting teeth when it comes to hedging (when to do & where), meaning once the index (assuming I'm trading the SPX) gets 10-15 pts within my short strike, I typically look to the SPY to hedge. I would welcome some of your commentary on how best to react to a move toward your short strike (i.e. what options or actiosn you consider to hedge you earlier spread)

May positions:

MAY 1210/1225 p, .95 credit, 4/12
MAY 1195/1215 p, .70 credit, 4/17

MAY 1345/1350 c, .70 credit, 4/18
MAY 1350/1360 c, .65 credit, 4/24

speaking only for myself BoSox your spreads are nice. I tend to do what you do.... in that sometimes to get a better credit I'll do a wider put spread but to hedge the call side shorten that up. And your certainly far enough away from current spx on the put side. nice trade

 

[El OchoCinco]

BUMP MAYPOSITIONS

MAY POSITIONS


-500 SPX MAY 1215/1225/1370/1380 Iron Condors @ $0.60

Credit = $30,000
Risk = $480,000
Return = 6.25%

Long 100 VIX MAY 20.00 Calls @ $0.20
Cost = $2,000

Long 50 VIX MAY 15.0 Calls @ $0.62
Cost = $3,100

 

[BoSox1962]

Quote from DonnaV:

speaking only for myself BoSox your spreads are nice. I tend to do what you do.... in that sometimes to get a better credit I'll do a wider put spread but to hedge the call side shorten that up. And your certainly far enough away from current spx on the put side. nice trade

Thanks Donna - I think I'm OK on the put side, but am a little concerned on the call side, thus I'm poking around for ideas on a hedge should the time come.

Also, as a matter of mechanics, I almost always leg into each side (call & put), OX lets you enter a IC, but I simply prefer legging in.

Thanks - Bob

 

[rallymode]

Quote from DonnaV:

to get a better credit I'll do a wider put spread but to hedge the call side shorten that up.

I really don't see how thats any beneficial. Yes you certainly get another quarter or two out of the put spreads but over the long term with the risk you are undertaking by widening the spreads i dont see that being any better to say the least especially considering its the put side you are widening.

 

[scntaxpro]

I apologize in advance if this is a dumb question, but wouldn't it be less risky to sell only bear call spreads instead of put spreads? The reasoning would be that the chance of the market spiking up is not as high as the market crashing due to 9/11 type event. I'm new at this so please be patient with my ignorance.


Also, Phil I just ordered your book. Can't wait to read it.

 

[El OchoCinco]

A lot of people say the risk of the market moving lower is greater than moving higher. Honestly I can find nice market surges that would be just as scary to a call position as a Black Swan would be to a put position. But naturally people do fear the big spike down and how panic becomes terror.

I place call and put spreads when appropriate based on my analysis but I do not think locking into only calls or puts is a good idea given the way the market moves. It is a personal choice you should make more so than a cookie cutter approach.