SPX Credit Spread Trader

SPX Jul1225 straddle sold for 61.4 now 43.3b/46.7a

Options:

1) Buy back for 45.9
Return=8.4% on margin, 2.8% on 3X margin
(not bad for 2 weeks)

2) Hold

3) Buy wings

4) Convert to double diag (I kind of like this one)


Quote from LeonPhelps:

An experiment.

Hypothesis: Selling premium when VIX spikes is profitable.

Tools: SPX options.

Method: Sell ATM straddle.

Procedure: SPX at 1224, VIX at 23.2. Sell Jul06 1225 straddle 60.9b/63.0a. Assumed btw bid and mid at 61.4.

Follow-up/exit strategy: TBA. Choices incl. hold for duration, closing at profit%, protecting with other options, SPY, or ES.
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Yea but if brown swan then loose on both positions. Then end up with brown pants...

Quote from dagnyt:

Yes. Just buy extras. Example. Buy 50 butterflys or condors. Then buy 10 (or more) of the cheaper call and the cheaper put. You would now own 60 calls and puts and you would be short only 50 of each. You would lose that extra money most of the time, but a black swan would be most welcome.

Mark
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Nice trade Leon...If I can play along with you...You initiated the trade primarily as a volatility trade. You sold the straddle when vol's were up and now they are down, thus the profit. For that reason I don't particularly like #2 or #3. I would take profits at this point because if we go up vol's will shrink and theta will hurt so we would really need to go up fast and far to really profit more than what you have already gained. If we go down then vol's will increase making the buyback more expensive. In my mind a volatility play is a short term play and its best not to tinker with it.

Why do you like the DD? I guess I don't see much positive in converting to it.
 
Coach:

Your current positions as I can dissect them:

Long the July DIAPERS.
Short the July SLEEP.

And over the next 20 something years:
Far Out of Your Money...

(Synthetic Call for help?)

:D
 
Agree, don't like 2&3 as much either.

Now with low vol can buy straddle maybe Aug for DD. If SPX goes down win on July str at 1225 and win on Aug with price move and likely vol increase.

If SPX goes up will start losing on July str and gain some on Aug str.

Could buy Aug straddle at 1225. Would mitigate loss on July str if SPX up since more pos bias. Also closer to delta neutral.

Could do 1/2 #1 and 1/2 buy Aug 1225 straddle

Also maybe buy 1175 July put for Taleb play.:p

Quote from Aardvark:

Nice trade Leon...If I can play along with you...You initiated the trade primarily as a volatility trade. You sold the straddle when vol's were up and now they are down, thus the profit. For that reason I don't particularly like #2 or #3. I would take profits at this point because if we go up vol's will shrink and theta will hurt so we would really need to go up fast and far to really profit more than what you have already gained. If we go down then vol's will increase making the buyback more expensive. In my mind a volatility play is a short term play and its best not to tinker with it.

Why do you like the DD? I guess I don't see much positive in converting to it.
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Quote from No Option:

Coach:

Your current positions as I can dissect them:

Long the July DIAPERS.
Short the July SLEEP.

And over the next 20 something years:
Far Out of Your Money...

(Synthetic Call for help?)

:D
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HAHAHA, good one No Option!:D

I'd say he's long milk futures as well!:D
 
I have traded the RUT a few times but I found the liquidity kinda scary for far otm spreads. I like to place orders with at least 200+ contracts and the open interest is usually at around 2,000 to 5,000. Shouldnt this be a red flag? I thought you should trade spreads that have open interest at least 20 times more then your size?
Thanks
 
Please help me with two following trades I have done with ESTX50

(1) Vertical spread as combo

short 3500
long 3450

(2) vertical spread as combo

short 3450
long 3400

Will long 3450 and short 3450 cancel out each other? If so will I have only one combo position with strike price apart 100 ? How can I maintain my both the original positions?

Thanks for the replies.
 
Quote from vedanta:

Please help me with two following trades I have done with ESTX50

(1) Vertical spread as combo

short 3500
long 3450

(2) vertical spread as combo

short 3450
long 3400

Will long 3450 and short 3450 cancel out each other? If so will I have only one combo position with strike price apart 100 ? How can I maintain my both the original positions?

Thanks for the replies.
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Yes, the two 3450 will cancel each other out and your position ill be long 3400 short 3500. Why would you want to maintain both positions as separate? IT's the same thing anyway.

E.g. If you decide you wanna close out the 3400/3450 spread then just close it out (i.e. sell 3400, buy 3450), this will then result in you ending up with the 3450 long, short 3500 spread.
 
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