Hi,
Does anybody here do the weeklies?
Does anybody here do the weeklies?
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Sure thing boss. Gotta love those Euro style XEO weeklies.
I have traded calenders on indexes for the past 2 months and have had mixed results but the losses (although small) have been of my own making. I have 2 positions now using puts (590's) and calls (600's) calenders on the XEO and both are slightly positive. Will be interesting how they work out going into expiration.
I disagree. You are making nothing but probability bets here and as such you are better off holding the position as close to expiration as possible. Now that's the problem with the wide FOTM spread, the cheap gamma you sold makes it prudent that you roll or adjust when it starts getting close but when you do that you dont know any better that it will close ITM than you did when you opened it. While the odds might appear better since now its closer to the market, it isnt certain(infact i can make an arguement that it is less likely to close ITM) and any losses you take in buying hedges you dont need or rolling when in fact you didnt have to will significantly reduce your credits. Make a roll within 20 points of short and you may lose 4-5 months of credits. Do that a couple of times and your account is cut in half and all along the spx didnt even expire in the money. you were right on your initial "bets" yet your account is cut in half. How about that for risk management?
I am not a fan of hedges and i mentioned why before but selling cheap upside gamma makes it prudent to do something during an adverse move now doesnt it? With FOTM spreads i think using hedges and rolls as risk management will perhaps hurt you(reduce your credits) as much as help you. I know we won't agree on this but i hope some people benefit from what i am saying. That's all.
EDIT
And if you really must do the put side because of the credits then by all means do it as it will bring in significantly more credits, but be prepared for more fake outs in my opinion then you get on the call side and of course theres that black swan killer to worry about too.
Thought I might chime in with something no one has mentioned.
"Reward" management. Its very much a part of "Risk" management. IOW you do NOT have to "set it and forget it"...I don't believe there is any rule that says you can not improve on your position. While there are some months that I have put on a spread and did nothing...MOST months I do make adjustments...mostly positive. Ex. closing a spread for .10 and opening a new one for .50...perhaps only small ones but they add up. Nov, Mar and April I made between 8-12 trades to improve my credit (reward management). Dec I rolled out of the way of a call spread (risk management. Jan didn't do anything except open and let it expire. Feb made one small improvement.
So HOW you manage both your Reward and Risk will add to your bottom line!
"Reward" management. Its very much a part of "Risk" management. IOW you do NOT have to "set it and forget it"...I don't believe there is any rule that says you can not improve on your position. While there are some months that I have put on a spread and did nothing...MOST months I do make adjustments...mostly positive. Ex. closing a spread for .10 and opening a new one for .50...perhaps only small ones but they add up. Nov, Mar and April I made between 8-12 trades to improve my credit (reward management). Dec I rolled out of the way of a call spread (risk management. Jan didn't do anything except open and let it expire. Feb made one small improvement.
So HOW you manage both your Reward and Risk will add to your bottom line!
The briefest most appropriate response I can think of: ROTFLOLPMP, TMTOWTDI, WCTYBTWHTKY, TANSTAAFL
Quote from rdemyan:
OK, Mo. How about some details for a change
Maybe one, just one of your trades for us to consider.
Thanks.
rdemyan, if you're anywhere close to retirement and your trading money is part of your retirement nestegg, then yes, put spreads might be too risky because of a potential black swan event (which, by the way, definitely seems likelier these days since there were 800 Al Quaeda members before Bush went to war, and today there are 35,000 members)...
Here is a weekend story.
....Once upon a time, there was this beautiful land called the Great Woods. Land so distant and mysterious that not many have dared seek yet many were fascinated by it. Many legends have been told over the years that only 5% of the hunters who enter those woods ever come back alive or well fed but nonetheless many more have took their chances and failed.
On a peaceful night, Joe wakes up in those woods. He knows not where he is, or how he got there. He soon realizes the camp he occupies is in those great woods so he begins his search. He sees plenty of food laying around the camp so he knows he will be alright.
Day after day, month after month, time goes by, food supplies start to dwindle. Joe knows that to survive he must expand his search and explore the woods further. He suddenly notices something he had never seen before. He sees a light between the trees. A light so distant and murky that he wonders if it even means anything.
As the dawn breaks, he leaves his camp and heads toward the light thinking he has found the location of the holy grail, the mean to his survival. On his path, he encounters other hunters who share knowledge and experience with him but he knows it all and listens not much. He hears about monsters that occupy those distand lands and those monsters are affraid of water or eat no meat. Fearfull he is not. Some talk about a bridge that no one has returned from once stepped on. Joe listens and discovers but keeps on marching along.
A few days later he finds himself alone and hungry. No food in sight only the distant light which is now not so distant. He can hear growls and roars around him and as he gets nervous he keeps on walking. He finally reaches the light at the end of the woods. To much of his dismay the stories have been right. There is a bridge crossing over a river and there is a beast which has just jumped out of the woods and joined Joe's path.
Oh my good, what am i to do Joe thinks to himself. There is no going back as my path is cut off from the monster. So he steps on the bridge as he finds comfort in the rumors that the monsters are affraid of water or eat no meat and he can always jump if worst comes to worst. Joe starts running to cross the bridge and the beast is now closing in behind him.
Joe is no longer fearless, Joe is no longer unaffraid. Joe is now running for his life. He looks down the river and what does he see? The river may not be to far below but it is very shallow and its sloping down along the side of the bridge. Any jump would cause an injury. The later he jumps the bigger the injury. He also sees that the bridge is a dead end, again to much of his dismay he is now in full blown panic mode. Joe has not many options, Joe has not many life lines left. Joe must make a decision. To jump and get injured or take his chances with the beast at the end hoping it will reverse right before it reaches him as it loves no meat.
To find out whether Joe[FOTM guy] took his chances with the beast or got injured with the jump and returned to the woods to hunt on one foot, tune in next season......The End
....Once upon a time, there was this beautiful land called the Great Woods. Land so distant and mysterious that not many have dared seek yet many were fascinated by it. Many legends have been told over the years that only 5% of the hunters who enter those woods ever come back alive or well fed but nonetheless many more have took their chances and failed.
On a peaceful night, Joe wakes up in those woods. He knows not where he is, or how he got there. He soon realizes the camp he occupies is in those great woods so he begins his search. He sees plenty of food laying around the camp so he knows he will be alright.
Day after day, month after month, time goes by, food supplies start to dwindle. Joe knows that to survive he must expand his search and explore the woods further. He suddenly notices something he had never seen before. He sees a light between the trees. A light so distant and murky that he wonders if it even means anything.
As the dawn breaks, he leaves his camp and heads toward the light thinking he has found the location of the holy grail, the mean to his survival. On his path, he encounters other hunters who share knowledge and experience with him but he knows it all and listens not much. He hears about monsters that occupy those distand lands and those monsters are affraid of water or eat no meat. Fearfull he is not. Some talk about a bridge that no one has returned from once stepped on. Joe listens and discovers but keeps on marching along.
A few days later he finds himself alone and hungry. No food in sight only the distant light which is now not so distant. He can hear growls and roars around him and as he gets nervous he keeps on walking. He finally reaches the light at the end of the woods. To much of his dismay the stories have been right. There is a bridge crossing over a river and there is a beast which has just jumped out of the woods and joined Joe's path.
Oh my good, what am i to do Joe thinks to himself. There is no going back as my path is cut off from the monster. So he steps on the bridge as he finds comfort in the rumors that the monsters are affraid of water or eat no meat and he can always jump if worst comes to worst. Joe starts running to cross the bridge and the beast is now closing in behind him.
Joe is no longer fearless, Joe is no longer unaffraid. Joe is now running for his life. He looks down the river and what does he see? The river may not be to far below but it is very shallow and its sloping down along the side of the bridge. Any jump would cause an injury. The later he jumps the bigger the injury. He also sees that the bridge is a dead end, again to much of his dismay he is now in full blown panic mode. Joe has not many options, Joe has not many life lines left. Joe must make a decision. To jump and get injured or take his chances with the beast at the end hoping it will reverse right before it reaches him as it loves no meat.
To find out whether Joe[FOTM guy] took his chances with the beast or got injured with the jump and returned to the woods to hunt on one foot, tune in next season......The End