SPX Credit Spread Trader

Quote from andysmith:

How do you decide when to lock in a profit with a fly versus just closing (offsetting)?
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Andy,

if you havent read any of cottle's books i highly recommend you do. You will get a great understanding of how to build positions and how to adjust them and when it makes sense to.

Bottom line is, adjustment is better than a simple offset ONLY in those cases where the new position completely aligns with your opinion of the market or when you get better pricing on a lock with the second leg than you would when you offset(which is hardly ever the case). Often traders have the illusion that because they leg into a position when the market moves in their direction they have a better trade. You really have to make sure you would open the position you are trying to adjust to even if you didnt have the original leg.

Example, you buy a bull call spread. The market moves in your direction and you decide to turn it into a FLY instead of offsetting. You dont think the market will churn but you do it anyway cuz now you have a free fly. This is an example of when not to adjust. Remember, you took directional risk on your original vertical which you didnt get compensated for. To make money now you have to be right twice. you really must not look at the FLY as a free one to make a clear choice whether its good to adjust or not.

I hope that helps.
 
Trading Manager:
- "When I started I had no money but I knew dozens of perfect trading ideas..."
- "And now" ?
- "Now I have dozens of millions under management and no ideas" :)
 
Input appreciated on the following

I have a rut 660-650 and a 640-630 bull put spreads and looking for ideas on preserving capital if market tanks. Have thought about buying back sold puts about 10 points away from strike and riding the put as far as possible.

all input appreciated

thanks
 
I don't trade the RUT but in just looking at the probabilities your short 660 is only abt 17% prob of exp....for insurance the prob of touching the 680 is a little better than 50/50 so if you think there is more free-fall to come a few insurance puts at 680 might make sense but remember insurance is considered "lost" $$

call me crazy but my spx short of 1245 has a much higher prob of exp but I think we are trying to find a bottom so hanging on at least until next week.
 
Quote from Aardvark:

I don't trade the RUT but in just looking at the probabilities your short 660 is only abt 17% prob of exp....for insurance the prob of touching the 680 is a little better than 50/50 so if you think there is more free-fall to come a few insurance puts at 680 might make sense but remember insurance is considered "lost" $$

call me crazy but my spx short of 1245 has a much higher prob of exp but I think we are trying to find a bottom so hanging on at least until next week.
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Thanks for the input
 
Mom and baby doing fine but long story short, she is going to be in the hospital until delivery which is in 5 weeks. Needless to say my schedule for the next 5 weeks will be messed up and lots of hospital time. I will be able to check in 1x or 2x a day and trade (although daytrading is out for right now).

Adjusted my GTC order of 22 SPX JUN 1150/1165 Puts to $0.80, no fill yet.


P.S. Do not want to take the thread off track so I appreciate the well wishes and no need to respond :D.


Quote from Aardvark:

Echo from all of us...mom & babe ok?
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JUNE POSITIONS

Sold 225 SPX JUN 1140/1160 Put Spreads @ $0.75

Credit = $16,875
Risk = $320,625
Return = 5.26%



Went with wider strikes because was not getting the credit I wanted at the strikes I wanted. Increased IV + Put Skew is helping me go further OTM for decent premium (gotta love IV pick me ups). If we have any significant up days I might put on a small partial hedge with about $2k since volatility is picking up and we could see some more dips. I doubt 1160 is in trouble for JUNE but I might make some money on the partial hedges ;).
 
Just reviewing my account to date on some down time. With a general estimate of average margin used I am up about 15% on SPX credit spreads year to date. No adjustments yet and only small partial hedges. Market is pcking up so I cannot expect that to stay the same but will focus on a net 2% a mont for the rest of the year if I can swing it with the expectation of at least one adjustment down the road :). IV is picking up and market is swinging wilder but I am trying to stay on track as we approach the halfway point.

Review your performances to date and reflect on what you have done. Let the wins instill your confidence and let limited losses remind you of the risk and also of possibly how well you worked to reduce that risk and keep them small. If you were bad at risk management and just got lucky, then remind yourself of that too as luck always runs out :).
 
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