SPX Credit Spread Trader

[momoneythansens]

Well I'd like to think that prices could only go down to zero and not lower :eek:

So, technically limited reward. That page also says it is volatility neutral which isn't neccessarily true so basically take that piece of $#@% for what it's worth: pretty pictures.

Yes it's a directional bet, if strikes are close together, not much different to short stock.

Quote from IV_Trader:

so its a directional bet , right ? Why its has a "limited reword" (page22) ?

 

[IV_Trader]

Quote from momoneythansens:

Well I'd like to think that prices could only go down to zero and not lower :eek:

So, technically limited reward. That page also says it is volatility neutral which isn't neccessarily true so basically take that piece of $#@% for what it's worth: pretty pictures.

Yes it's a directional bet, if strikes are close together, not much different to short stock.

oh , I see. Limited reword a la Enron short...
Mo , thanks for all r/r details in previous posts.

 

[momoneythansens]

Quote from rdemyan:

BTW: Do you ever post any of your positions anywhere where we might get a look.

Ha! You are persistent, I'll give you that. The answer is no I'll refer you to the first sentence of Phil's second ever post on this journal

EDIT: Also, didn't someone post earlier that, I think it was Dan Sheridan, recommends adding two long puts to 10 bull put contracts.

Yes, there was a flurry of posts in reference to Dan Sheridan and the likes of "ears" on iron condors etc. but to be honest I wasn't really paying attention. It's all a variation on a theme: long premium to protect short premium. Proactive vs. reactive. I'd rather have the "ear" without the iron condor though.

 

[Crucis]

Quote from momoneythansens:

To summarize:

Iron condor: 5 * 1160/1140/1305/1310
Long PUT hedge: 1 * 1225

Probably best to play around with strikes and numbers to get a feel for what is appropriate to your own risk appetite and directional bias etc.

Cottle's discussion on the slingshot hedge is a good place to start.

MoMoney.

Thanks, Mo. That certainly helps.

 

[riskarb]

Quote from rallymode:

momoney,

as always a great post outlining strategy details. In this case - risk-reversals. I would like to add one more thing if you don't mind.

When people consider using the r/r vs a straight up long premium/debit spread hedge they must be mindfull of the unbound risk beyond the short strike.(many traders will stop/get limited right here due to various reasons like margin, trading permission, etc.)

The purpose of implementing a R/R // futures is to replicate gamma into otm vanilla and exotic options. A R/R can carry shadow-delta > 100 due to +vega and skews. They are split-strike synthetic futures w/tons of convexity and slippage. I love them, but they're not a trading vehicle for intraday strats.

The above caveat aside, they're an excellent gamma replication for dotm verticals(not recommended) in lieu of futures[overhedge on static gammas].

 

[El OchoCinco]

I pasted risk's entire post into an online translation site and this is what the output was:

Quote from riskarb:

The purpose of implementing a R/R // futures is to replicate gamma into otm vanilla and exotic options. A R/R can carry shadow-delta > 100 due to +vega and skews. They are split-strike synthetic futures w/tons of convexity and slippage. I love them, but they're not a trading vehicle for intraday strats.

The above caveat aside, they're an excellent gamma replication for dotm verticals(not recommended) in lieu of futures[overhedge on static gammas].

 

[riskarb]

IOW, it's impossible to flatten gammas w/o taking on more risk with futures than is embedded in the spot-position. This is especially the case with exotics due to convexity-slope. Deep otm verticals carry similar gamma attributes. The g/v convexity of a R/R is the best hedge in the direction of spot-risk.

 

[Heatheranderson]

Coach
I am looking into options on futures for SPX and RUT hedging. Any idea when OX will provide them?.can we get to see the quotes in any other sites?.

thanks

 

[andysmith]

Riskarb, do you saute that in butter or olive oil?

Quote from riskarb:

The purpose of implementing a R/R // futures is to replicate gamma into otm vanilla and exotic options. A R/R can carry shadow-delta > 100 due to +vega and skews. They are split-strike synthetic futures w/tons of convexity and slippage. I love them, but they're not a trading vehicle for intraday strats.

The above caveat aside, they're an excellent gamma replication for dotm verticals(not recommended) in lieu of futures[overhedge on static gammas].

 

[El OchoCinco]

It is highly unlikely that OX or ToS will have options on ES or ER2 futures. It requires a different type of account and clearing and the ToS guys, who would love to have options on futures, told me it is unlikely right now given all the hoops and requirements they would have to meet/do. Perhaps ToS will have it in a few years but for now, only IB has em at the discount retail level among the firms we discuss here...

www.cme.com will show delayed options on futures quotes...

Quote from Heatheranderson:

Coach
I am looking into options on futures for SPX and RUT hedging. Any idea when OX will provide them?.can we get to see the quotes in any other sites?.

thanks