SPX Credit Spread Trader

[jnbadger]

Quote from cdowis:

Now what?

Does anyone agree with me that we are sitting around twiddling our collective thumbs.

No bull put spreads == not in a falling market.

And bear call spreads? Am I crazy?

I do FOTM, but 1340 and 1160 is abit wide even for me, and legging in is not a pleasant thought.

Hmmm....

Comments, suggestions, profound insights?

I am a lurker on this thread and have learned a ton.

But I also daytraded for years and years, and then eventually got a real job while swing trading.

Now I am in a position where I can work and do a little spread trading.

Thru all of this experience (not a ton I know), I can tell you one thing. Being impatient will cost you more than you will ever be willing to risk.

Please wait until a viable opportunity presents itself. I've seen too many guys go down in flames. Sitting on your ass will make you more money than you think.

Jeff

 

[El OchoCinco]

The mentality of most has to change in order to improve. People view being in the market as only in an option, stock or future position and when in cash, they feel they are on the sidelines, wasting ammo and doing nothing. A few weeks ago I made a point on my radio show (cannot find the archive) that once you realize that you have, in the context of this thread, 2 investment choices- cash or a credit spread. Both are investments and your job is to move between the two at the right time. When not in a credit spread, you are invested in cash and vice versa.

So you need to convince yourself that cash is an investment so you will never ever again say you are out of the market. When in cash you are in the cash/fixed income/money market so it is indeed an investment with return.

Now you will not worry ab out being in or out of the market but realize you are always in the market one way or the other and it is just about timing the transfer between the two. If I have no credit spreads, my money is still invested and earning some interest, no matter what, so I am 100% invested all the time and that is the way I view it. Whether in cash or credit spreads or whatever, it is 100% invested each and every day and I never feel like I am on any sideline or sitting on my hands. How could I feel that way when my money is 100% invested all the time

Quote from trkarl:

Yeah thats the part I had to learn the hard way. Forcing trades and having to be in the market was a large part of my tuition. I now try to think of it as a game of chess. When you start making your moves quickly you inevitably make mistakes that cost you.

Tim K

 

[qamhwr]

I liked you comments and thought that it was interesting when you stated that fundamentals were not short term. My interest come from the fact that this is basically an option board and option are generally short term.

George

Quote from Cache Landing:

I'm always interested to meet people who think that the fundamental strength/weakness of a company/sector/index is meaningless.

I've heard a few arguments supporting these claims that were well thought out, but none of them have really had a very solid foundation because the arguments were always taken out of context.

My view.... Fundamentals are the most important FIRST step. IOW, which industries are likely to gain an advantage under the given circumstances. And on the flip side, which are likely to be disadvantaged by certain factors. For example, our current economic situation (rising rates) is beneficial to health care and consumer staples. If I'm looking to make a bullish trade on an equity, I am going to favor those sectors. On the other hand high rates really hurt the tech sectors such as chips and box makers, thus if I want to make a bearish trade I will gravitate toward them.

Once I have narrowed my search in this manner I can move on to TA to provide a slightly better than random entry into my positions.

Most arguements against fundamentals that I've heard don't acknowledge the fact that fundamentals are not a short term indicator. They are indicative of likely strength in comparison to the broader market over a longer time frame. A strong company in a strong sector isn't necessarily going to go up today. It might not go up at all, but it will likely not drop as much/quickly as a weak one in a weak sector.

Whenever I neglect fundamentals completely I usually find myself in trouble. Case in point: my last few AAPL trades.

 

[tivthetrader]

Mr. Risk Arb,

You asked a month or so ago what would happen to tiv if the sp's dropped 70 points. Well, they have dropped 80 pts since then, and rumor has it that he is the #1 performer in the country for the year.

 

[momoneythansens]

Congratulations Tiv! Sounds like a good couple of months for you.

Someone with your amount of $$AUM is clearly well beyond needing any kind of external validation or approval from contributors on anonymous forums, so I can only assume your post here was because you were not aware of the private message mechanism or indeed Riskarb's own trading journal - both of which are perhaps more immediate channels for your communications with Riskarb in future Not that I'm the thread police

Hope you have continued success. Can I assume you were portfolio short gamma but net long contracts to achieve your results? Congratulations again.

Quote from tivthetrader:

Mr. Risk Arb,

You asked a month or so ago what would happen to tiv if the sp's dropped 70 points. Well, they have dropped 80 pts since then, and rumor has it that he is the #1 performer in the country for the year.

 

[El OchoCinco]

Well said.. beat me to it lol....

Heading back home from Trader's Expo.. what a wild week in the market huh...

Quote from momoneythansens:

Congratulations Tiv! Sounds like a good couple of months for you.

Someone with your amount of $$AUM is clearly well beyond needing any kind of external validation or approval from contributors on anonymous forums, so I can only assume your post here was because you were not aware of the private message mechanism or indeed Riskarb's own trading journal - both of which are perhaps more immediate channels for your communications with Riskarb in future Not that I'm the thread police

Hope you have continued success. Can I assume you were portfolio short gamma but net long contracts to achieve your results? Congratulations again.

 

[riskarb]

Quote from tivthetrader:

Mr. Risk Arb,

You asked a month or so ago what would happen to tiv if the sp's dropped 70 points. Well, they have dropped 80 pts since then, and rumor has it that he is the #1 performer in the country for the year.

Congrats Tiv! Nice to hear you're banging away... FWIW, I was referring to TradeCobalt's posting of your blotter which reflected a ton of short itm/atm puts in SP pit FOs. I am under the impression short puts do poorly in a 70-handle decline. =)

Don't buy a tux yet -- rumor has it that a Euro-fund that started the year with $10mil has hit nearly an order of mag return in the first half with exotics. He's a few bets away from the "unit" milestone, $100mil. Perhaps you've done better as you don't mention return on cap.

 

[andysmith]

My 2 cents: start with stocks with strong fundamentals, especially rate of earnings growth, and then apply some basic TA. It's a strong combination. Trade in the direction of the overall market trend.

Quote from Cache Landing:

I'm always interested to meet people who think that the fundamental strength/weakness of a company/sector/index is meaningless.

I've heard a few arguments supporting these claims that were well thought out, but none of them have really had a very solid foundation because the arguments were always taken out of context.

My view.... Fundamentals are the most important FIRST step. IOW, which industries are likely to gain an advantage under the given circumstances. And on the flip side, which are likely to be disadvantaged by certain factors. For example, our current economic situation (rising rates) is beneficial to health care and consumer staples. If I'm looking to make a bullish trade on an equity, I am going to favor those sectors. On the other hand high rates really hurt the tech sectors such as chips and box makers, thus if I want to make a bearish trade I will gravitate toward them.

Once I have narrowed my search in this manner I can move on to TA to provide a slightly better than random entry into my positions.

Most arguements against fundamentals that I've heard don't acknowledge the fact that fundamentals are not a short term indicator. They are indicative of likely strength in comparison to the broader market over a longer time frame. A strong company in a strong sector isn't necessarily going to go up today. It might not go up at all, but it will likely not drop as much/quickly as a weak one in a weak sector.

Whenever I neglect fundamentals completely I usually find myself in trouble. Case in point: my last few AAPL trades.

 

[nlslax]

Quote from andysmith:

My 2 cents: start with stocks with strong fundamentals, especially rate of earnings growth, and then apply some basic TA. It's a strong combination. Trade in the direction of the overall market trend.

Let me just repeat this to make sure I got it...
- Strong Fundamentals
- Combined w/TA
- Trade w/the Trend

Thanks Guy.

 

[Jack Haddad MD]

Quote from andysmith:

My 2 cents: start with stocks with strong fundamentals, especially rate of earnings growth, and then apply some basic TA. It's a strong combination. Trade in the direction of the overall market trend.

To aid in the comprehension of how technical analysis works, one needs to know that a finite number of traders participate in the markets on any given day. These individuals interact with each other on the trading floor and form collective behavior patterns. These patterns are not only observable and quantifiable, but also repeat themselves with statistical reliability; that said, technical analysis is a method that organizes these collective behavior patterns that give clear indications of when there is a greater probability of one thing occurring over another. Fundamental analysis attempts to take into consideration mathematical models that weigh the significance of a variety of variables (corporate earnings and revenues, price-to earnings ratio, gross margins, valuations, etc..) that could effect the relative balance or imbalance between the supply and demand of a particular stock, commodity, or financial instrument. The trouble is that this economic equation that defines the laws of supply and demand does not have an exponential variable to quantify fear or greed. Fear or greed is an element of human nature which is called market sentiment or behavioral analysis, and fundamental analysis gives it no consideration. It's people who express their beliefs and expectations about the future that make prices move and not fundamental models. The fact that a fundamental model makes a logical and reasonable projection is not much value if traders who are responsible for most of the trading volume are not aware of the model or simply don't believe in it. Bob Prechter, a famous practitioner of technical analysis once commented that, "... the main problem with fundamental analysis is that its indicators are removed from the market itself. The analyst assumes causality between external events and market movements, a concept which is almost certainly false. But, just as important, and less recognized, is that fundamental analysis almost always requires a forecast of the fundamental data itself before conclusions about the market are drawn. The analyst is then forced to take a second step in coming to a conclusion about how those forecasted events will affect the markets! Technicians only have one step to take, which gives them an edge right off the bat. Their main advantage is that they don't have to forecast their indicators."