SPX Credit Spread Trader

Coach:
On your Sept. 1200/Aug1225 ES diagonal put spread. How did you arrive at your short strike of 1225. Was it based just on support levels? Since you want the index to approach your short, is there a ballpark delta your are looking for as you would for a credit spread?. Thanks for your input.

Quote from optioncoach:

Want to add that on put diagonal spreads in a black swan event, you have a great adjustment choices to roll the short to the next month and roll into a bear put spread at a small debit given the inflated premiums in the longer-term months, or you could roll into a credit spread in the long month or roll into a reverse calendar.

I think the better adjustment potential makes the put diagonals easier to deal with in a black swan event, but in no way is hedged from such an event. Just my opinion in viewing what could be done if the market falls to fast.
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I chose the 1225 strike because of support at 1229 or so in the ES futures. I do not really need the index to approach my short strike at expiration, I would rather have it expire worthless and retain some value in the SEP long strikes.

I do not select the short strikes the same for diagonals as I do for put credit spreads. For bull put spreads, I want both strikes way OTM and I do not want the index to even come close to them. For the diagonal put spread, I mainly want the short to expire worthless, or if the market is moving lower, todo so at a measured pace so I can make an adjustment. I want to have the strikes as close as I feel comfortable so that I can benefit from moves higher in IV than I would if I was way OTM.

Quote from JimPos:

Coach:
On your Sept. 1200/Aug1225 ES diagonal put spread. How did you arrive at your short strike of 1225. Was it based just on support levels? Since you want the index to approach your short, is there a ballpark delta your are looking for as you would for a credit spread?. Thanks for your input.
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We're in the 'waiting for another opportunity mode' right now. Two weekds ago, when the VIX dropped to 14, we placed AUG/SEPT diagonals and some 1325/1315c Credit spreads... reason for trade was seasonality and geopolitical conerns. When the VIX spiked on Tuesday... we grabbed some 1115p/1125p credit spreads to complete an Iron Condor.

Be patient.... cash is a great strategy. Nothing wrong with waiting.

M~



Quote from arizonadreamer:

Sailing,

Thanks for the reply.

Do you have a specific example of something that looks good to you for the current period. I'm not asking for advice, but just trying to get an idea of your methodology. I came in late to the discussion.

AZD
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You're welcome... just note the data is always delayed by one day.

It would be great if others shared some of their sites of interest.




Quote from volatilitypimp:

OMFG, sailing if you were a woman I would kiss you right now. That is the best tidbit I've received in the past 10 months. 2yr, 4yr volty charts are crucial to find decile levels. You just saved me a few grand, cause I was gonna buy optionvue software for that reason. Obvs, they have mad scanners and such, but still. Sailing, I love you, man. :D

[EDIT: I seriously love sailing. I know I'm usually a sarcasic Sid on this site, but this is really the coolest sh** I've heard in a while.]
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Can someone help me out with this? I've searched and searched but can't find if/where this has been discussed before.

Concerning VIX put options: shouldn't there be a floor around 10 for VIX. E.g. for option modeling, if you sold VIX puts at 15, seems like you could safely assume the lowest VIX would go would be in the 9-10 range.

Unlike a stock that could go to zero. IF VIX goes to zero, that means we are all dead anyway.:)
 
Hey Leon...interesting you bring that up. When I was in Chicago for the 3 day TOS deal end of May Tom Sosnoff brought up selling the VIX puts and said it was a great trade that they had been doing all year (selling the 12.5's) making consistent money. Of course this was before June's volatility made the premiums shrink. However he said historically with the low's at 9-11 it provided a great balance in the portfolio. If the VIX does drop then all the longs in your portfolio are doing very well. He really liked the trade.
 
I just think aloud off the top of my head, you guys have to do the rest :).....

Not usre how far OTM or how many SPY calls, for example, you would do v. short VIX puts.
 
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