SPX Credit Spread Trader

Quote from momoneythansens:


I think the pertinent point is just to be aware of these mispricings.

Btw, how goes the journal?
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The journal is ok. This month has been slow with relatively few positions for a few reasons.

1) I have been cautious about today's fed announcement. This might not be a good reason to hold off, but for some reason I found myself having a hard time pulling the trigger with that in the back of my mind.

2) That journal takes a back seat to my real account in terms of time spent, and I don't list all my trades on the journal as the strategy isn't the same. Until now though, I have actually made the trades from the journal in a real account. They haven't just been paper trades.

3) For the past couple weeks I have been moving to a new house. That is occupying a lot of my time.

In any case, after next week I'm hoping the journal account will show a return of >30% since inception. Not incredible, but not bad I guess.:)
 
Quote from rallymode:

I see what you are saying but to me it doesnt matter whether you view the vertical as a part of FLY's or any other combo. I am talking from a r/r perspective on that SPECIFIC spread. What i am saying is that you are less likely to get a fill on the 10 pointer vs the 5-pointer unless you give up some credit i.e. reduce your r/r. If you can manage to get a fill on a wider spread for the same r/r, you are in a better trade.

Example:

1340/1345 BCS for $1 credit r/r 1:4
1340/1350 BCS for $2 credit r/r 1:4



Now whether the first spread is really worth the quoted $1 when the 10 pointer is $2, i doubt it. But since things are only worth what you can buy/sell them for, the instant you place your trade if you can manage to get the 10 pointer for $2 when you can only get the 5-pointer for $1, you are in a better position. That's all i was saying.
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RallyMode,

I have to disagree with you. Selling a 10 point spread for $2 is inferior to selling twice as many 5 point spreads for $1. You are giving up the value of the butterfly.

If a MM is willing to pay $1 for a 5 point spread and the butterfly is worth at least .05 he will be just as willing to pay $2.05 for the 10 point spread. Why offer to sell the 10 point spread for $2.00 when you know he will pay $2.05 for it? Of course this assumes the MM is willing to pay $1 for the 5 point spread to begin with.

Am I correct in assuming you mean rate of return when you say r/r? If so please know that the "Rate of return on a spread" is a a poor indicator of how options and option spreads are valued.

Thanks, Knucklehead
 
I had 2 shorts call 1340/1350 in May and sold for $0.90. I decided to buy them back for $1.8 before FOMC. Now the result is out and the market dropped. However, some of my 1345/1355 MAY short calls are still there so the profit on those should offset some lost on 1340/1350.

It was interesting to see the b/a very wide. I had to give up 35 cents from mid to get filled.

Before I bought the vertical back, I tried to roll by buying flies 1340/1350/1360. The mid was $0.9 and I gave up $0.5 ($1.4 debit) and still did not get filled. It was very difficult to trade before FOMC.
 
>30% YTD not to be sneezed at! I'll be checking in next week after expiration to see the results.

Quote from Cache Landing:
In any case, after next week I'm hoping the journal account will show a return of >30% since inception. Not incredible, but not bad I guess.:)
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Bad luck Nick - that's the way the cookie crumbles. Just get another cookie from Maverick. You'll have to answer a question though. I recently found out he is in fact the cookie monster:

cookiemonster8ii.jpg



Quote from skanan:

I had 2 shorts call 1340/1350 in May and sold for $0.90. I decided to buy them back for $1.8 before FOMC. Now the result is out and the market dropped.
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