SPX Credit Spread Trader

Well I decided that trading and investing was way more interesting and exciting than law and wanted to move to it full-time. I also spent some years building up my account, capital, expertise, skills, etc.... since you cannot just decide to do it and immediately do it. Even if you do not have a family to support lol. The decision was made around 2001 or so when I went for my Masters and I have been pretty much building it up since then.

But for me it is not the money alone. I want the free-time it will bring me for my family and personal pleasures (I write a lot and also have been teaching on the side). I am just a little bit older than you so just keep working on building up your capital and your expertise. The first step is really confidence and you honestly do not get that unless you have been doing it for some time. You also need security. I do not intend to live 100% from trading income as that would be the most stressful. It is about finding the balance so that you are not trading out of need to live or stress for each dollar, but because you love it and want to do it and happen to make money from it....


Quote from rallymode:

coach, what made you decide you wanted to leave your career and become a full time trader?

i, myself, am looking to venture into trading full-time but i need to grow my account first to a place that would allow me to trade conservatively while making enough to live off of. I'd say 500k-1M is a nice place to be at. I'm 27 so i have a few years left before retirement LOL
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Well the put spread was put on a week or so ago and today I added the call side because I have no faith that we can really move much higher over the next two weeks.

As far as premiums I would not grab $0.15 on its own. I did that since it was being added to the put side and I went far OTM. In general I want at least 2 - 3% minimum for the month as far OTM as I can get. I do not have an absolute value minimum for the spreads since I use 5, 10, 15 and 20 point spreads. Higher premiums might mean closer to the market and I would rather go as far out OTM as I can for 3% than always gun for 5%. It is really a personal preference more than a right or wrong rule.

Quote from Eric99:

Optioncoach,

I noticed you put on new spreads, 75c on the put side, 15c on the call side. Do you have a minimum credit you look for? I get uncomfortable at less than 50-60c per side for a 10 pt spread. Your thoughts?
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Quote from rallymode:

One of the sites i frequent had the following article today. Whether you believe in history or not, if you are bored, interesting read nonetheless.

Yesterday, we had an enormous daily rise in the VIX of over 30%. To put this into perspective, we have only had one larger VIX spike in percentage terms since 1998, and that was the day we opened after 9/11. A chart in my most recent post on the Trading Psychology Weblog puts this into perspective.

What typically happens after a single day spike in VIX?

Since January, 1998 (N = 2108), we have had 27 occasions in which VIX has moved more than 15% in a day. All but one of these occasions were market declines. The next day, the market (SPY) was up by an average .37% (18 up, 9 down). That is much stronger than the average daily change for the entire sample (.02%; 1092 up, 1016 down).

Just as important, the five days following the VIX spike day showed much higher VIX (and price) volatility than average. The average daily VIX change over the next five days was 7.91%, and the average daily price change was 1.42%. Those compare with the averages for the sample of 4.13% and .89%, respectively.

After a five-day period of VIX volatility averaging 9% per day or more, the next day in SPY averaged a loss of -.18% (11 up, 15 down), but the next five days averaged a gain of .34% (14 up, 12 down). Once again, VIX volatility led price and further VIX volatility. Over the next five days, the average daily price change was 1.39% (vs. .89% for the sample), and the average daily VIX change was 7.14% (vs. 4.13% for the sample).

Overall, when the five-day average VIX change is 6% or greater (N = 287), the next five days in SPY average a gain of .67% (178 up, 109 down). This bullish tendency exists even when VIX levels following the VIX volatility are below 20. Interestingly, there is no edge one day out, however, in any of the data.

In short, volatility in the VIX begets volatility, with bullish implications five days out. That having been said, VIX percentage changes can be misleading, as recently pointed out by Adam Warner in his excellent blog. Nonetheless, look at the time periods with the highest five-day periods of average VIX change: April, 2005; September, 1998; March, 2004; and September, 2001. These were good times to buy stocks for an intermediate-term hold.
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Personal opinion is that these results are merely indicative of the idea that a large drop many times presents a good buying opportunity. Therefore, the more likely course for the market after a large drop is to recover at least part of what was lost.

Most of the stuff stated in that article is common sense really.
 
I watch it in general just for the futures in the morning pre-market and in general for major news/economic reporting. Otherwise, the hosts are super annoying, arrogant and just contribute to noise pollution. So for an 8:30 AM or 10:30 AM economic news announcement or breaking news it does the job, but for commentary it is just filling air time basically. for every bull there is a bear and for every pundit saying X they have one saying Y.

Since I am trading indexes I follow what is going on in a big scale in the market and gloss over any stock specific news unless it truly affects the whole market. Makes it easier to ignore individual news items on Pfizer or Genentech and just look at the big picture.

Quote from Heatheranderson:

Coach
Do you watch CNBC?. Do you keep track of fundamentals?.
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Quote from Cache Landing:



Most of the stuff stated in that article is common sense really.
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i agree. i find it interesting how some people like to go back and pull out numbers to prove a point or confirm a bias. I am sure if i looked at enough data i can find a case to support the opposite or an exception :D
 
Coach,

The volatility changes over the last month have me thinking that I don't want to do PUT spreads anymore, only CALL spreads. I'm just concerned that a black-swan event or run of panic selling could crtically hurt my account and psyche. I'm starting to think that I only want to do credit spreads exclusively when stochastics look right and I can stay FOTM. I want to then possibly augment these trades with debit spreads where my potential loss is known up-front. Any comments ? :confused:
 
Quote from Synaptic:

Coach,

The volatility changes over the last month have me thinking that I don't want to do PUT spreads anymore, only CALL spreads. I'm just concerned that a black-swan event or run of panic selling could crtically hurt my account and psyche. I'm starting to think that I only want to do credit spreads exclusively when stochastics look right and I can stay FOTM. I want to then possibly augment these trades with debit spreads where my potential loss is known up-front. Any comments ? :confused:
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To the statistician, it is all just probability bets anyway. All call spreads or 1/2 calls 1/2 puts, it's all the same if you're not intending to forecast direction/vols.
 
Quote from Cache Landing:

To the statistician, it is all just probability bets anyway. All call spreads or 1/2 calls 1/2 puts, it's all the same if you're not intending to forecast direction/vols.
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I dunno , Fear is a much more powerful emotion than greed. Panic selling is the thing I hate to see the most when I'm in a PUT spread.
 
Well in reality, volatility is still relatively low overall. From January 1 to now we have gone nowhere really and the only major issues was the huge drop from 1325 to 1245. If you are far OTM and selecting strikes based on good analysis the increased vol just means you can go even further OTM for more cushion and relatively it stays the same. In other words, 80 points OTM when vols were 12% or 100+ points with vols near 18%. The numbers affect where you select strikes but the overall approach is the same for me.

If your fear is black swan or huge panic selling then stochs or any other indicator is not going to help since we already acknowledge that we cannot predict such things. I deal with it by being far OTM, being prepared to adjust when needed and not loading up 100%. Right now I am about 100 points OTM on my put spreads and with vols ticking up, that is as close as I will get going forward given the Fed meeting uncertainties.

I do not have any detailed comments except to trade with a plan that makes sense and is reasonable. If you want to better time your entries, then using TA can certainly help as has been proven throughout the thread. Debit spreads can act as partial hedges or you can actually take directional bets based on that TA. As long as you have an overall risk management plan, do not overextend yourself, make good analytical decisions and not emotional ones, then I cannot say your approach is a bad one.

Never trade afraid
Never spread with dread
Never chase with haste
Never rush when you should hush
Never credit when you should forget it
and.....

Comfort and cash beats spreads and a rash


Quote from Synaptic:

Coach,

The volatility changes over the last month have me thinking that I don't want to do PUT spreads anymore, only CALL spreads. I'm just concerned that a black-swan event or run of panic selling could crtically hurt my account and psyche. I'm starting to think that I only want to do credit spreads exclusively when stochastics look right and I can stay FOTM. I want to then possibly augment these trades with debit spreads where my potential loss is known up-front. Any comments ? :confused:
More...
 
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