thx.. looks like we are smack dab in the middle...kinda hard to sell a CS where we are churning here....also agree with your edit comments....same sentiment reflected in the redoption advisory update
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Although drawn differently my "charts" show us at the peak consolidation of the upward trend since beginning of the year. we had higher lows but the highs have begun to flatten out despite the two ro three spikes to 5 year highs.
I bet this trend will continue until the May 10th Fed meeting so MAY spreads will get a lot of theta the last 2 weeks and a breakout will not be as wide or far. Right now it is still hard for me to say the outlook past the next few weeks but the upward movement is still the major trend and until we break lower and stay there, the bias is SLIGHTLY BULLISH.
I bet this trend will continue until the May 10th Fed meeting so MAY spreads will get a lot of theta the last 2 weeks and a breakout will not be as wide or far. Right now it is still hard for me to say the outlook past the next few weeks but the upward movement is still the major trend and until we break lower and stay there, the bias is SLIGHTLY BULLISH.
Trading Plan (based on Dan Sheridanâs lecture on adjusting IC)
1. The market is SP (spx, etc) which is high liquid.
2. Place a position every month, with about eight weeks to expiration.
3. Place a short straddle about 1 std deviation away from the market price â basically, put it as far away as possible getting the target premium.
4. Place the long wings 20 points from the shorts.
5. When the underlying is 10 away from either short leg, close out the entire position.
6. If there is at least 20 days before expiration, place a new position on the next market day at least 15 points away, and add 50% to the size of the position. (e.g. if there are 10 contracts, the new position should have 15).
7. Close the position at least one week before expiration, or when the target has been reached.
1. The market is SP (spx, etc) which is high liquid.
2. Place a position every month, with about eight weeks to expiration.
3. Place a short straddle about 1 std deviation away from the market price â basically, put it as far away as possible getting the target premium.
4. Place the long wings 20 points from the shorts.
5. When the underlying is 10 away from either short leg, close out the entire position.
6. If there is at least 20 days before expiration, place a new position on the next market day at least 15 points away, and add 50% to the size of the position. (e.g. if there are 10 contracts, the new position should have 15).
7. Close the position at least one week before expiration, or when the target has been reached.
Di you mean place a short strangle 1 std deviation away from market price?
I would think 2std deviations might be a safer route. Did they discuss how often the SPX moved about 1 std deviation because if it is within 10 points you close. Do you end up closing a lot, letting a few expire worthless and a few are taken off at partial profits?
I would think 2std deviations might be a safer route. Did they discuss how often the SPX moved about 1 std deviation because if it is within 10 points you close. Do you end up closing a lot, letting a few expire worthless and a few are taken off at partial profits?
>Di you mean place a short strangle 1 std deviation away from market price?
Oops.
>I would think 2std deviations might be a safer route.
It all comes down to the target premium. Again, he suggest placing it as far away as possible and still get the premium target.
BTW, regarding the black swan. He suggests one method by putting "ears" on the put side. If you have 10 longs, place two of them in front the short put, and the other eight on the wing.
Oops.
>I would think 2std deviations might be a safer route.
It all comes down to the target premium. Again, he suggest placing it as far away as possible and still get the premium target.
BTW, regarding the black swan. He suggests one method by putting "ears" on the put side. If you have 10 longs, place two of them in front the short put, and the other eight on the wing.
>What do you like the most? Being safe or big fat premium
I prefer safety. I really really hate to adjust positions.
So, the question is -- place the strangle really far away, and place your longs 30 ticks away to get a decent premium, or bring it in closer and have the longs closer.
I prefer safety. I really really hate to adjust positions.
So, the question is -- place the strangle really far away, and place your longs 30 ticks away to get a decent premium, or bring it in closer and have the longs closer.
I agree with Sheridan. The idea of 1 sigma is just that, you can expect to adjust 1 out of 4 months, or a little more than that (68-75%).
The adjustment I guess you could say it's martingale like, putting on 50% greater size than original. But adjustment is a new s.d. from index, and it's never the intention to leave it go, and lose full value.
Many who trade, when they think 'adjustment' there is a negative connotation associated with it. Sheridan's contention(mine too), is that adjusting is just part of the game, no big whoop. If the index zooms to your short strike the first week u put the ic on, yes u will experience pain, but he feels putting a new ic on with bigger size has a greater chance to expire worthless(after a big index move it is more likely to oscillate and churn).
Is it perfect? Hell to the no, but it works for me.
The adjustment I guess you could say it's martingale like, putting on 50% greater size than original. But adjustment is a new s.d. from index, and it's never the intention to leave it go, and lose full value.
Many who trade, when they think 'adjustment' there is a negative connotation associated with it. Sheridan's contention(mine too), is that adjusting is just part of the game, no big whoop. If the index zooms to your short strike the first week u put the ic on, yes u will experience pain, but he feels putting a new ic on with bigger size has a greater chance to expire worthless(after a big index move it is more likely to oscillate and churn).
Is it perfect? Hell to the no, but it works for me.