SPX Credit Spread Trader

[rallymode]

Quote from elovemer:

Rallymode,

Do you have to leg in.... to place SPX spreads using IB ?

No. You simply quote the spread and then put a limit order at the mid +/- a nickle or a dime then you are at the MM's mercy. I only leg into ES options.

 

[rallymode]

opened june spy 129/128 put spread for .30 debit.

 

[ready]

Since last Thursday, when the S&P broke through 1250 and hit a low of 1245.34, the S&P is up roughly 41 points. Even Tuesday’s massive decline from 1280 to 1260 failed to come close to that low, which was 81.36 points under the high we put in on May 8th.



As a follow-up on that skew in volatility for puts versus calls, after our 1st half hour of trade the $1 out-the-money put is now at the June 1195 strike or 7% out-the-money, while the nearest call strike trading for $1 is the June 1320 strike, which is 2.6% out-the-money.



This reflects a normalization of the pricing, as puts ALWAYS carry a premium to the calls. One explanation is that there are no natural sellers of puts, but millions of potential natural sellers of calls. The reason for that is simply that individuals, institutions, hedge funds and mutual funds own stocks and are thus in position to sell calls against their holdings with no additional margin. The miniscule percentage of shorts in the markets would be the only natural sellers of puts and they along with professional traders seem to have moved the skew between calls and puts back into a normalized equilibrium

 

[Sailing]

KTM,

Thanks... appreciate the info. We're definitely looking to use the increased (or decreased) depending how you view it... to help risk manage our positions.

Do you use IB.... TS... or private broker?
Any suggestions?

Murray

Quote from ktm:

Margin wise, yes it is a huge advantage as you get about twice as much margin if you are on BOTH sides of the market. The simplest example is an OTM naked call and an OTM naked put: with SPX you pay separate margin for each, with SPAN you esssentially only pay for one side. It has been a few years since I really looked at SPX as I've been using SP/ES for that time, although I understand SPX has 60/40 tax treatment nowadays.

I think liquidity is far better in SPX, although the CME recently moved the dime tick theshhold to $5 from $3 and added a second set of contracts to expire EOM, so there's more rolling and writing capability throught out the year. It is still very easy to move 400 contract blocks in both SP/ES.

An additional concern for those managing OPM is that SPX is considered a security and subject to SEC regs, whereas futures options fall under the commodity regs of the CFTC (NFA). There are very distinct differences in licensing and registration requirements at the state and national level depending on whether one trades securites or commodities.

Another advantage of SPAN is the ability to incorporate futures into the position and reduce exposure and margin. If you are going with spreads, as most are in these products, you need the ability to enter spreads. Legging is tough over in the SP/ES camp!!!

 

[El OchoCinco]

The market is a real bee-ach huh...

All glowing in the morning and when real trading started it bounced off resistance and moved lower. My opinion is that we are at the top of this upswing channel in the chart I put just above and I see 1265/70 in a few days if the market does not reverse again today.

 

[Cache Landing]

Quote from optioncoach:

The market is a real bee-ach huh...

All glowing in the morning and when real trading started it bounced off resistance and moved lower. My opinion is that we are at the top of this upswing channel in the chart I put just above and I see 1265/70 in a few days if the market does not reverse again today.

Anybody get filled close to the top. I was scratching and clawing, but still nothing.

 

[Cache Landing]

Quote from Cache Landing:

Anybody get filled close to the top. I was scratching and clawing, but still nothing.

OTOH, I'd love to see 1265 and VIX @ 17 within the next couple days.

 

[rallymode]

Quote from Cache Landing:

OTOH, I'd love to see 1265 and VIX @ 17 within the next couple days.

That's what i think too. Very high chance we make a run at 1260-1270 over the next few days.

 

[rallymode]

Quote from Cache Landing:

Anybody get filled close to the top. I was scratching and clawing, but still nothing.

i got filled on a spy debit spread, it appears the MM's arent giving in easily today on the SPX.

 

[Heatheranderson]

I opened 20 SPX 1350/1360 July bear call spreads for a credit of $0.70.Even with fed meeting and a cause for a pause, i doubt we will reach 1350 in 6 weeks.