SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Quote from Cache Landing:
I'm always brave (translated stupid) enough to pull the trigger, but this market is showing serious lack of conviction from the bulls. Also, the credits on the put side suck, so I jumped at the chance to convert this morning. Talk about timing it right. Market started down right after I got filled. That rarely happens.
That was a really nice trade to convert to B-fly Cache I had to leave this am and just got back for the mkt close. I'm actually glad we didn't hold the highs..a few days of positive action but not skyrocket upwards is good for the bulls and would bring volatility down. Can't blame ppl for taking some profits this am on the big bounce.
Agreed, we really don't want whipsaw action, but we have come really close to closing negative today which would also be bad. I actually converted this morning because of the vol drop. Last night I had estimated that I would need a 10-11 point rise accompanied by a 200 basis point drop in vols to get a 2.00 fill. It came this morning as predicted but I had to give up 0.05 to MMs.
You can change your credit spread into a butterfly by buying a debit spread. If you opened a 1235/1240 put credit spread you would buy the 1240/1245 put debit spread to create the butterfly. To lock in a profit you have to buy the debit spread for less credit than you took in. In this case it would happen if the market goes up after you open the credit spread. This lowers the price for the debit spread and if you get the move you need and time it right you lock in a profit with a chance to make a good amount should the index close at your short strike.
Historical Options Quotes can be found here:
http://host.businessweek.com/businessweek/Historical_Quotes.html?Button=NEW+REQUEST&Symbol=WIB+AR
These quotes are great for backtesting... but are available for active contracts only. Some contracts have been active for years... (LEAPs) others, like June... for up to 9 months.
Enjoy,
Murray
http://host.businessweek.com/businessweek/Historical_Quotes.html?Button=NEW+REQUEST&Symbol=WIB+AR
These quotes are great for backtesting... but are available for active contracts only. Some contracts have been active for years... (LEAPs) others, like June... for up to 9 months.
Enjoy,
Murray
Well, first let me explain since someone quoted my original post before I edited it. I confusingly included a locked in profit of $1.00 in my post. That number included the gains from the other contracts that I offset. The actual locked in profit from the conversion was 0.35 which I was happy to get considering my opinion on the market.
To explain... I originally sold to open SPX JUN 1235/1245 bull puts when it looked like the 200SMA was going to hold. It should be noted that I don't trust MAs on indices as much, but I also believe that there will be strong support at 1245. This is why I chose the 1245 for my short.
Last night my analysis showed that I would need +10 points and -200 basis point drop in IV to get filled at 2.00 on the adjacent 1245/1255 bear put. That happened this morning. I offset the majority of the bull puts and the remainder I converted by buying to open the 1245/1255 bear puts, equal in number to the remaining bull puts.
If SET is outside the 1235/1255 range then I will have a guaranteed profit of 0.35 because I opened the debit fly at a credit. Now I will hit max profit if SET is 1245 as that is where I have positioned my shorts.