SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Just signed up for the September one as the Jun is already filled.
I am....I guess my legs and I will be out'ed at that time
however I am looking forward to it and the windy city...and hoping my daughter will hook up with me on Fri
Hi everyone, got filled with the following today:
MAY SPX
BTO 1360 Call
STO 1350 Call
Credit = $0.65
BTO 1245 Put
STO 1255 Put
Credit = $0.55
Total Credit = $1.20
If all goes well, a 12% return per contract @ $1,000 (not counting commissions). Good luck with your trades.
Rookie Rich
MAY SPX
BTO 1360 Call
STO 1350 Call
Credit = $0.65
BTO 1245 Put
STO 1255 Put
Credit = $0.55
Total Credit = $1.20
If all goes well, a 12% return per contract @ $1,000 (not counting commissions). Good luck with your trades.
Rookie Rich
it is easy to evaluate today by looking at the same spread as close to the money as you wish. furthermore, the exit price lessens with every passing day making it, discontinuity withstanding, less risky.
Quote from ryank:
Rally,
What I think you are driving at is that your relatively close to the money spreads are less risky because you bring in more premium with less dollars at risk. If/when your position is threatened, you roll to a new position with more contracts (kind of a Martingale type of adjustment in a way I guess). This type of adjustment can put you around breakeven or even small profit if all works well for the month given a max loss of $2 per $5 spread as you claim in a recent post (I hope I'm not misrepresenting what you said). Given that you are closer to the money, aren't the chances of getting whipshawed while making adjustments somewhat good?
I've been modeling some spreads similar to what you have been talking about (a May 1275/1280/1335/1340 IC) and assuming a max loss of $2 on one side and then making an adjustment. It looks reasonable that one could take in a good credit while using less margin. I guess the test for me would be to see what happens when one of your shorts (or longs) is hit and you adjust, then I can see if things work out as they are being described.
I've got that nagging feeling I'm missing something so please don't flame me if I am. Just point it out and I will go back and crunch the numbers some more.
ryan
In case the wording in my last VIX post was a little too subtle, I'll attempt to be clearer here.
From the specification it appears that VIX options for hedging a black swan event are about as useful as:
Not wanting to start the debate again, just doing my bit to raise awareness
MoMoney.
From the specification it appears that VIX options for hedging a black swan event are about as useful as:
- A chocolate teaspoon.
- A solar-powered telescope.
- A screen door on a submarine.
- Herpes.
Not wanting to start the debate again, just doing my bit to raise awareness
MoMoney.
Quote from Cache Landing:
I think this is what is hoped for to make the VIX hedge successful.
Mo:
Problem is you cannot definitively say that a spike to 30 on the VIX will not move the MAY 15 Calls to something close to intrinsic value. So the usefulness cannot be so negatively described unless you have proof that a spike to 30 in the VIX will not cause any movement at all of significance in MAY 15 calls.
Problem is you cannot definitively say that a spike to 30 on the VIX will not move the MAY 15 Calls to something close to intrinsic value. So the usefulness cannot be so negatively described
unless you have proof that a spike to 30 in the VIX will not cause any movement at all of significance in MAY 15 calls.Well the chances of getting whipsawed arent any better than the chances of the spread going against you the minute you open it.
Really, I have no clue if i will be whipsawed.However, i look forward to getting whipsawed as it actually helps my strategy rather than hurt it as is the case with a FOTM spread.
I dont know what you mean. I dont recall saying anything like that. I try to keep my r/r near 1:3. when i adjust, i either write off the loser completely and cover the loss with the premium of the higher spread or close it at break even(during the dreaded whipsaw) and make 1:3 r/r on the higher spread. A max loss of $2 on a 5 point spread doesnt make sense to me.
MoMoney,
i agree with you 100% but you are beating a dead horse here. We will find out for sure when the next black swan happens.
Quote from rallymode:
Well the chances of getting whipsawed arent any better than the chances of the spread going against you the minute you open it.
However, i look forward to getting whipsawed as it actually helps my strategy rather than hurt it as is the case with a FOTM spread.
After the post by Prevail this morning I played around with the models in TOS a little more (boy am I not getting any work done this morning). I think you may be onto something. The key, as it is with any strategy, is the management of the position. Using additional cash to make an adjustment instead of buying a hedge seems to work well, as long as you have enough cash to make the adjustments. If you have to make 2 or more adjustments you better have a really healthy reserve available to do it with or you could be sunk for a good chunk.
I will have to try this out on a small scale with June positions, I haven't found any May positions that would work right now. You put on your May call position right before April expiration right? Any May put positions yet?
ryan