SPX Credit Spread Trader

Fundamentals in the most broad sense of the term, should not be forgotten. Anyway, I was talking about the fundamental strength of various industries under given circumstances. I wasn't trying to imply that fundamental analysis will be able to accurately forecast price movement.

That said, there is also value in certain TA, and experience has shown that when teamed with basic fundamental strength/weakness, one can gain an edge. The retail trader must believe that he/she is able to gain an edge because we aren't in a position to be able to make enough money from mispriced options.

Anyway, we really shouldn't go down this road again because it will get monotonous. Sorry OC. I didn't mean to start up another TA/fundamentals debate. That really has been done to death.
 
Not only been done to death but I trade the SPX so I can pretty much ignore fundamentals. Sure I watch the fed, inflation and the economy yada yada yada, but no earnings forecasts, profit margins, p/e ratios etc...

So fundamental analysis is like an autographed picture of Cameron Diaz in a bikini....... I am sure it has value but not really wanted here. :D
 
Quote from optioncoach:

Not only been done to death but I trade the SPX so I can pretty much ignore fundamentals. Sure I watch the fed, inflation and the economy yada yada yada, but no earnings forecasts, profit margins, p/e ratios etc...

So fundamental analysis is like an autographed picture of Cameron Diaz in a bikini....... I am sure it has value but not really wanted here. :D
More...


your monogamy (to JA:p) is commendable:)

Tues PPI, Wed CPI and Thrus Fed...should be an interesting week!
 
So coach,
The credit spread strategy that we all mostly trade here has worked extremely well in a low vol trending market, and while that situation isn't coming to a end just yet, we might be seeing a higher vol environment soon.
So in light of these possible events, I'm starting to do a re-analysis on what would be the most profitable trading strategy once vol spikes. Would you have any reccommendations? I'm beginning to look at our sister trade, the debit spread and long strangles or straddles.

All in all, I don't feel the need to be a "one trick pony", and while credit spreads were Grrrreat for the last 2-3yrs, I'm not quite sold on the fact that they will be the most profitable way to trade in the future.
Any and all comments are appreciated....

peace,
burrben


Quote from optioncoach:

Not only been done to death but I trade the SPX so I can pretty much ignore fundamentals. Sure I watch the fed, inflation and the economy yada yada yada, but no earnings forecasts, profit margins, p/e ratios etc...

So fundamental analysis is like an autographed picture of Cameron Diaz in a bikini....... I am sure it has value but not really wanted here. :D
More...
 
Quote from optioncoach:

Not only been done to death but I trade the SPX so I can pretty much ignore fundamentals. Sure I watch the fed, inflation and the economy yada yada yada, but no earnings forecasts, profit margins, p/e ratios etc...

So fundamental analysis is like an autographed picture of Cameron Diaz in a bikini....... I am sure it has value but not really wanted here. :D
More...

That's what I meant when I said, "in the broadest sense of the term". IOW, events like interest rate increases, hurricanes, etc... that cause a change in the fundamental strength or weakness of the overall market.

Anyway, blah blah blah. And now back to credit spreads.
 
Quote from burrben:

So coach,
The credit spread strategy that we all mostly trade here has worked extremely well in a low vol trending market, and while that situation isn't coming to a end just yet, we might be seeing a higher vol environment soon.
So in light of these possible events, I'm starting to do a re-analysis on what would be the most profitable trading strategy once vol spikes. Would you have any reccommendations? I'm beginning to look at our sister trade, the debit spread and long strangles or straddles.

All in all, I don't feel the need to be a "one trick pony", and while credit spreads were Grrrreat for the last 2-3yrs, I'm not quite sold on the fact that they will be the most profitable way to trade in the future.
Any and all comments are appreciated....

peace,
burrben
More...

I have to respectfully disagree with this statement. While I do agree it's not a good thing to be a 'one trick pony' for any trader, I don't feel the viability or profitability will be coming to an end for the credit spread strat(under proper risk management). Think about it, the higher the vol, the higher the expected range, the juicier the premiums you can sell, and futher otm you can go.

There are many other strats in a spiking vol environ., but how do you know it's the top of the spike? IOW, top picking vol can be a dangerous game. You can be profitable being a net buyer of premium in spiking vol, as long as realized vol finishes higher than the implied vol you bot the optins at.

IMO, having a portfolio of a few different strats across various uncorrelated markets, is the best way to diversify yourself, rather than putting all of your eggs in one basket.

my 2 cents.
 
The problem is that your question implies that credit spreads are purely non-directional strategies. Bull put spreads can be bullish, neutral to slightly bearish and bear call spreads the opposite. If we are trending higher, which, by the way we have since OCT, you can still make money in a trending market if you trade the other side of the trend.

I do not feel credit spreads are a one-trick pony really. I am trading them in flat, downwards and upwards markets which to me is a month to month outlook. Yes vols have been quite historically low but increasing vols just mean I adjust to the conditions. Maybe stick with puts and take advantage of the skew. If vols spike the credits improve with the expected range of the market. When VIX spiked to 19 or so and the SPX dipped to 1245, I was able to initially grab spreads at 1140/1160. Sure the VIX could have spiked mroe as the market broke through 1200 and I have to deal with those situations.

Now I also daytrade futures and that allows me not be a one trick pony with respect to a strategy overall. So I may not have any JULY positions after next week, but I am still trading daily. So credit spread are fine in any environment but many people here trade other option strategies just to have some nice portfolio divesification. It is a personal preference more than anything :D

Quote from burrben:

So coach,
The credit spread strategy that we all mostly trade here has worked extremely well in a low vol trending market, and while that situation isn't coming to a end just yet, we might be seeing a higher vol environment soon.
So in light of these possible events, I'm starting to do a re-analysis on what would be the most profitable trading strategy once vol spikes. Would you have any reccommendations? I'm beginning to look at our sister trade, the debit spread and long strangles or straddles.

All in all, I don't feel the need to be a "one trick pony", and while credit spreads were Grrrreat for the last 2-3yrs, I'm not quite sold on the fact that they will be the most profitable way to trade in the future.
Any and all comments are appreciated....

peace,
burrben
More...
 
I was more impressed that I myself got up at 8 AM lol. Nice meeting you and putting a face with some of the names here. ANd I have already punished myself for not working JA into the speech somewhere...

I promise it will not happen again!


Quote from No Option:

Coach did a nice job presenting at the International Traders Expo this weekend.
For those who got up bright and early (actually a pretty full house) he covered his Option Trader Ratio Call Spread article.

http://www.optionstradermag.com/trac5oh/OptionsTrader0606.pdf

Not one mention of JA though....
More...
 
for learning purposes, i would appreciate any and all comments on this trade especially in the context of it vs FOTM: july spx iron fly 1250/1185/1315. max credit 1 contract $4,230 (assuming filled at mid) max lost $2,270. margin $2,270. breakeven 1207.70/1292.30. ToS 6/11/06. thanks!!
 
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