SPX Credit Spread Trader

[momoneythansens]

Hmm...reminds me of my first post on this thread

Quote from rdemyan:

I have zero experience with futures so maybe this is a stupid question. I see that Coach often posts that he would short futures in the event of a large, hard market drop.

But, won't a lot of traders be trying to short SP (and derivatives thereof) futures? Whose going to be on the other side to buy?

 

[rdemyan]

So I'm looking at signing up with IB in order to trade options on futures (eventually). I don't understand this rigamarole on paying for real-time quotes.

I'd appreciate it if the guys using IB and trading SP, ES options could give me a quick explanation of which real-time quote "package" I should select.

As I understand it, the cost will be $1.65 per contract. Can I get a better deal if I tell them that Mo or Coach sent me

 

[scienter]

Thanks. By stoc. x-over, meant fast, crossing the slow in either an overbought/oversold condition.

Quote from rallymode:

Actually what ive being doing is even simpler than that(ma crossovers?). I do it at/near the 3-month highs/lows. Been doing it for 18+ months now. 90% win rate in my case with 20-25 points OTM. However, it was all due to the relatively tame rangebound market. Past experience/back testing is no guarantee of future results

With IV increasing i am beggining to lean on long vega bets using debit put spreads at the highs and credit ratio put spreads at the lows.

 

[El OchoCinco]

M- If you go in as an entity and only you place the trades, then perhaps only you need to have the Series 7. I doubt every member of the entity has to have the Series 7.

Quote from Sailing:

Besides IB, does anyone use or know of a discount broker with competitive rates and good filles offering ES?

M~


Personally, I'm interested in trading through Vtrader using haircut margin.... but many of my group members are not interested in series 7 certification. Thanks.

 

[scienter]

As Rally points out, would likely not suffer max loss on the entire 30%....most positions would be breakeven....IF managed correctly.

Could you share a bit of your countertrend system? Of course there are indicators of wanning strength....OB/OS indicators, newhighs/lows,volume spikes, ...when used together can tell a story....However have you come up with a simpler system like Rally? For example, I could see how keying in on the slow line of a stochastic that has reached/is nearing ob/os territory might work.... Thanks for your reply

Quote from Prevail:

one place to start is to calculate expectency. (.7* 2) - (.3*3). 1.4-.9 equals .5. this is before trading costs. an early exit would easily bring the theoretical loss down.

my countertrend trading system had nearly 15 consecutive winning trading signals from dec to may. countertrend models have higher winning rates but they are even more pronounced in the sp so a premium selling method on it with strict exits is typically viable. this is one of the reasons rally does well.

 

[El OchoCinco]

I manage two separate accounts where my money is mixed in with my main money in the prop account and other money intermingled with a managed account that is with OX. Long story how it ended up that way lol. But my money in the the OX managed account is joined with a pension account and I am not going to put that in a prop shop.

So my SPX trades here have been in the OX my futures daytrading and ES options are in the prop account.

Quote from Sailing:

Coach,

By now you obviously see the huge advantage using HairCut marginl, especially in your current trade position.

For what reasons then are you still trading Reg-T?

Curious,

M~

 

[El OchoCinco]

I believe you are referring to SP options which are options on the S&P index at $250 a point. They are pit traded and although are starting to trade electronically I see way more volume in the ES options than the SP options. Also I already trade ES, so it is easy for me to use ES to hedge my ES options positions.

And since I am using X-trader I really do mind placing orders the old fashioned way lol. Simply click and before I can blink I am filled at the market. With ES options I have had no problem splitting bid asks and shaving (they are not that wide anyway).

SP options do not make more sense to me given the platform and electronically trading nature of ES. Each bid ask spread has at least 200 contracts on each side and averages about 500 in the front month even far OTM. They are quite liquid.

Quote from nravo:

Coach,

I have heard that SPX futures options offer better liquidity/spread than ES options (but SPX futures options do not trade eletronically.) If the account is large enough, and you don't mind placing orders the old fashioned way, doesn't SPX futures options make more sense than ES options, or any other electronically traded options on futures that exist?

 

[El OchoCinco]

I do have vega exposure but it is not extreme since 1200 ATM puts will increase as well as my 1175 OTM Puts. At 1200 with IV back near 25 or so, I may not need to do anything at all. The position may be closed for a net credit perhaps or even locking in the gain or I let it go depending on time to expiration. With a week or so to expiration, I would not mind having it drop a little further to have the ES move into the lottery ticket zone.

I do not have the Greeks in front of my right now, but the jump in VIX to 26 or so will not hurt so much since I am long vega ATM plus more deltas initially. If time is short then theta and vega will battle and I will still pull a profit or even out.

The bad scenario is if it jumps past 1175 with a VIX spike. Then the juiced ATM short puts will be rich with premium and I would have to follow one of the adjustments I outlined.

Quote from Prevail:

phil, if sp hits 1200 the vix/vxo could easily increase 50 percent, I would say closer to 75 percent is more likely, with vega exposure how do you handle this with your ratio spread?

 

[nravo]

Quote from momoneythansens:

This paging business actually works LOL.

Yes, Tradestation uses RJO's MCD platform for trading ES options.

The only other discount broker I know that might support ES options are Xpresstrade.com but I think they specialize in pit traded contracts. E-mini's might not even be supported at all.

Besides, commissions were something like $10/contract + floor brokerage fees etc. Yikes!

I know nothing of the following other possibilities:

http://www.expressfutures.com/ (possible commissions price match)
http://www.arrowfutures.com/
http://www.eminidirect.com/


MoMoney.

IB offers ES options.

 

[Eric99]

Quote from rallymode:

I am a big fan of counter trend trading. to an outsider it might appear i am trying to catch falling knives or short tops but when all is said and done these entries are much better for the type of trading that i do. Looking back at all my losers through the years, i can honestly say that 95% of my trades can be closed close to breakeven if my directional/vega expectations change while in the position. Another way to reduce the theoretical average loss of such system is to roll up/out and increase size instead of a simple offset but the success there is debatable especially in a high iv market.

Rally,

I've spent some time looking at long term trend-following systems. One of the most popular and reasonably effective uses simple Bollinger Bands to signal breakouts. These systems work well when used on currencies/rates/some ags but lose money on stock indices. I turned the system on its head by using Bollingers as a counter-trend indicator and the system made money in indices. I haven't tested a CTM spread program based on Bollingers yet, but intuitively, I expect it would work.

I have tested increasing size on rolls. I like this concept but you need sufficient discipline to trade small and leave lots of available cash to support larger positions. Two rolls and your margin is triple your initial position. This is your classic Martingale strategy, but if you have confidence in a counter-trend system, it would work nicely.