SPX Credit Spread Trader

Quote from optioncoach:

On the first spread (1130/1110) the mid is around $1.10 and with a wide b/a for the spread you might not get filled right away only shaving a dime. I see no rush to dive in today so leave the order there and see if it gets filled. If you need to get in today then you might need to take off another $0.10 to $0.20 at the most to get filled perhaps. However, let it sit today and see what happens.

Same with the second spread. The mid is around $1.50 or so and you are a dime off the mid in a very wide b/a spread. Let it sit but if you need to get in, take off another 10 or 20 cents.

Orders just off the mid have a lower chance of getting filled, but if you are patient and let it sit, the odds are, as long as the market has not swung to far away, you might eventually get a hit. I have let orders sit for hours to get filled since I was not trying to time the entry so perfectly. I had room to sit back and see if I get a fill. You can start shaving off a dime and re submit the order and wait and after a long time shave another dime to see if you get hit. The goal is not to get impatient.
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Thanks Coach. The second spread (1130/1100) has been filled. This is my first trade with credit spread strategy inspired by this forum.

Return on risk = 1.4/(30 - 1.4) = 4.9%

I have used naked puts a lot when my Monte Carlo Simulation shows a positive return for naked writes. However, with credit spreads, it seems to me that the expectancy is always negative. So I am using a different rationale for credit spread trades.

Here are my reasons:
1. My short leg is more than 100 pts.
2. 1130 is lower than the low of 2005. There are many support zone in between.
3. the market is currently oversold, so I am selling now to take advantage of it.

I have many net short puts and calls in both IWM, OIH, VLO etc. It seems that I have doing too many underlyings. Is it true that it is better to focus on just only product? Or is it better to diversify into many products?
 
ES Credit Spread Update


7/6/06

Sold 300 July ES 1220/1210 Put Spreads @ $0.55

Credit = $8,250

Risk at Expiration = $141,750

Return = 5.8%

7/7/06

Bought 5 ES JULY 1265 Puts @ 9.25 for $2,312.50

NEW NET CREDIT = $5,937.50

7/13/06

Sold 5 ES July 1255 Puts @ 11.25 for $2,812.50 (Roll above hedge into bear put spread)

New Partial Hedge Position:

1265/1255 Bear Put Spread for net credit of 2.00 or $500.

Bought 5 ES July 1250 Puts @ 9.50 for $2,375

NEW NET CREDIT = $6,375 (gross of course)




7/14/06

Bought 300 ES July 1220 Puts @ 8.25
Sold 600 ES July 1200 Puts @ 4.20

Net credit = .15 or $2,250

RESULT = 300*600 1210/1200 Put Ratio Spread

New Breakeven is at 1190. OCT ES low was 1200 so I have the 1229 and 1200 low previous lows for possible support areas for the next 4 days. I have no problem with ES settling at 1200 for JULY expiration :D.



7/18/06

Closed 5 July ES 1265/1255 Bear Put Spread for 7.75 or profit of $1,937.50

Still have 5 long 1250 Puts and still feeling a potential bottom so decided to take the spread off since its profit potential is limited. Gonna leave the long 1250 Puts which I am gonna let run for some additional profit potential if the market stays where it is.

Still have 300*600 Put Ratio Spread at 1210/1200 strikes.
 
I assume your is a debit spread? What was the debit for a 3 by 2 if I may ask?


Quote from Prevail:

nice phil. i've got the 1225x1205 july 3x2 ratio spread, lots of profit potential.
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actually I set it up for a .5 credit several weeks ago. I didn't think it would actually come into play.

I'm developing techniques to ward against dicontinuity. I think i'm leaning towards backspreads and calendars with their vega benefits. the trick is keeping the costs of down to be short premium yet be vega positive.
 
For a credit? Did you leg into it with those wide strikes?


Quote from Prevail:

actually I set it up for a .5 credit several weeks ago. I didn't think it would actually come into play.

I'm developing techniques to ward against dicontinuity. I think i'm leaning towards backspreads and calendars with their vega benefits. the trick is keeping the costs of down to be short premium yet be vega positive.
More...
 
Coach
I put on thie ratio spread my OX virtual account and forgot all about it.Now, with RUT at 671, this is what it looks like.(see attachment). I thought it would be an interesting problem to tackle and keep our minds sharp.can we discuss the possible trade adjustments in this kind of situation.thanks
 

Attachments

Prevail:

Sorry but I got baby mush brains today. How did you open a long 3 1225 and short 2 1205 spread for a net credit without legging in? Or did I get the position wrong?
 
Those look like diagonal spreads, not put ratio spreads :)

Quote from Heatheranderson:

Coach
I put on thie ratio spread my OX virtual account and forgot all about it.Now, with RUT at 671, this is what it looks like.(see attachment). I thought it would be an interesting problem to tackle and keep our minds sharp.can we discuss the possible trade adjustments in this kind of situation.thanks
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