SPX Credit Spread Trader

rdemyan · Apr 26, 2006

Andy, I can't really give you hard numbers. He generally looks for about 10% on an IC. But when he goes out 7 weeks, i think he generally gets 6 to 7% on each side.

Also, I believe that Gator also subscribes to his service and follows him more closely than I do. He can probably provide more information on Mike's success rate.

I don't follow him as closely anymore because I lost a good chunk on a Google IC that he recommended over a year ago. It's that loss that precipitated my only doing credit spreads on indices (my personal preference now). Still, I don't think he has ever lost on an SPX trade in the 14 months that I've been watching, but I'm not 100% sure on that.

Quote from andysmith:

rdemyan, I used to track Mike's Couch Potato for a short while but did not continue. I like the 7-weeks-out spreads too. How much does Mike typically collect in terms of %ROM?

parisd · Apr 26, 2006

Hi Coach,

I was away from this thread for months.

Does someone remember when or where in this huge thread the VIX as hedging had started to be used or explained by Coach

Also what kind of event is a black swan ?

Thanks

Denis

Quote from JimPos:

Coach:
I know you have purchased VIX May calls for hedging against a black swan type event. To take this one step further, what do you think of placing a contingent order to sell the calls if the VIX reaches a predetermined amount. This is all hypothetical but for example:

Say you have sold the 15 May 1215/1225 put bull spread where margin at risk is $15000 and also purchaced 15 VIX May 20 calls.

Also assume you placed a contingent order to sell the VIX May calls at 10.00 if the VIX reached 30 or greater. OX lets you place this type of trade.

If there was a black swan type of event and assuming the above contingent order was filled if the VIX shot up to 30 or more, the full amount of your margin at risk would be protected. Thiis assumes the calls will be worth 10 if the VIX is at 30 or more. I know we don't really know what will happen to the calls and there are a lot of ifs, but what do you think? Thanks for you response.

El OchoCinco · Apr 26, 2006

Here is where the VIX discussion started:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=49586&perpage=40&pagenumber=121

A Black Swan event (no clue where the dumb name came from) is an unexpected out of nowhere event which causes the market to crash very hard (9/11, October 1987, etc..).

Quote from parisd:

Hi Coach,

I was away from this thread for months.

Does someone remember when or where in this huge thread the VIX as hedging had started to be used or explained by Coach

Also what kind of event is a black swan ?

Thanks

Denis

damon_achey · Apr 26, 2006

Quote from optioncoach:

...A Black Swan event (no clue where the dumb name came from) is an unexpected out of nowhere event which causes the market to crash very hard (9/11, October 1987, etc..).

Found here and with almost the same wording you used...

http://en.wikipedia.org/wiki/Black_Swan_(disambiguation)

In intelligence, a black swan is a large-impact hard-to-predict rare event beyond the realm of normal expectations. The event most commonly referred to as a black swan is the 9/11 attack. The term comes from people's expectation for all swans to be white and not expecting the rare black ones until spotting one.

andysmith · Apr 26, 2006

OK, thanks. Looks like 10%-15% for 7 weeks or so.

Quote from rdemyan:

Andy, I can't really give you hard numbers. He generally looks for about 10% on an IC. But when he goes out 7 weeks, i think he generally gets 6 to 7% on each side.

Also, I believe that Gator also subscribes to his service and follows him more closely than I do. He can probably provide more information on Mike's success rate.

I don't follow him as closely anymore because I lost a good chunk on a Google IC that he recommended over a year ago. It's that loss that precipitated my only doing credit spreads on indices (my personal preference now). Still, I don't think he has ever lost on an SPX trade in the 14 months that I've been watching, but I'm not 100% sure on that.

codyhopkins · Apr 26, 2006

Quote from parisd:

Hi Coach,

I was away from this thread for months.

Coach,

Were you aware that some of the subscribers to this thread were not attached to their computers 24/7 reading and replying to posts? I thought that was part of the rules of engagement!

LOL

Cody

El OchoCinco · Apr 26, 2006

Paris' punishment is being meted out as even as we speak...

Quote from codyhopkins:

Coach,

Were you aware that some of the subscribers to this thread were not attached to their computers 24/7 reading and replying to posts? I thought that was part of the rules of engagement!

LOL

Cody

rdemyan · Apr 26, 2006

Coach:

Earlier today I posted and I included a question regarding your use of futures to hedge black swan. It seems like your general attitude towards the black swan is that you have futures that you can short and possibly the VIX hedge will turn into something as well. So this gives you a reasonable comfort level that you will be able to manage the black swan risk.

But if a person doesn't trade futures and is unsure and inexperienced on how to use these during a black swan event, then should they feel as sanguine when the black swan event hits?

Thanks.

Quote from optioncoach:

Paris' punishment is being meted out as even as we speak...

GATrader · Apr 26, 2006

Black swans by their nature are generally unhedgeable even in this 24 hour trading environment. Think about this for a minute- you are short gamma and an exogenous event happens at 10PM EST. What do you think the emini book is going to look like. I can tell you that there would probably be 1 lot bids every handle. In other words the gap risk is still there. Bottom line is position sizing or owning some teeny options as insurance.

rdemyan · Apr 26, 2006

GA: I don't understand what is meant by gap risk, particularly when you say there will be a bid at every handle. I'm a newbie to understanding this. Thanks.

Quote from GATrader:

Black swans by their nature are generally unhedgeable even in this 24 hour trading environment. Think about this for a minute- you are short gamma and an exogenous event happens at 10PM EST. What do you think the emini book is going to look like. I can tell you that there would probably be 1 lot bids every handle. In other words the gap risk is still there. Bottom line is position sizing or owning some teeny options as insurance.