SPX Credit Spread Trader

Just a thought....

I don't know where your positions are strike priced at, but we've left on the next month longs and just sold a put against them and converted into a diagonal.

What has happed is a mixed portfolio of diagonals and spreads.

The diagonals turn into spreads. The expiring spreads turn into new diagonals. The advantage here... is less commissions, only one b/a spread to fight, and nice combination of fixed VEGA vs. floating VEGA.

We're doing this only if the next month strikes... fall within a comfortable OTM spread range.

Give it a thought

M~



Quote from ryank:

We are now inside the 45 day window for September options. I'm waiting until after the Fed meeting next week before putting on any Sept positions. Also need a little more juice taken out of my August before I roll to September.

Today's downward move is helping my put diagonal some, not a big change but at least the market and VIX are moving in the right direction for me right now :D.
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Theoretically worse.... but in reality it hasn't occured to us in the past six months. Yesterday was a good example of that... the market didn't move... but the VIX was up about 5%.

You're correct in your assumption that in general... being long vega (call calendars) is not a WIN-WIN.

For that reason alone... we don't play the traditional call-calendar strategy. We much prefer the Put-Calendar (3-4 month long, 1-month short). This is a WIN-WIN situation. Increasing VEGA and DELTA into the position.

Now... just a side note. Consider when VEGA increases is associated with both positive and negative delta moves? Just prior to EARNINGs annoucements. Taking that into consideration is where our latest adventure with Double-Diagonals is headed.

We're playing earnings annoucements, 2-3 weeks prior with Double Diagonals... and playing it as a VEGA play only. It's been itneresting.... and I'll report at the end of the year with some data.

M~



Quote from Prevail:

murray, also, when a call calendar is initiated there is an estimated loss on a risk graph if the short strike goes atm. with the vix dropping as the market climbs (assumption) does this estimated loss get worse or better being long vega?
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What this implies is that... the THETA differences is not noticeable until the last few days because of the MMs holding that 'dead premium' in the options until expiration.

As the Double-Digaonal moves up and down... you have offsetting DELTA in all four option positions. It's the VEGA which controls the P/L intra month for your visual eye, but that's a somewhat false impression... unless your trading VEGA. If you're waiting for expiration... you gaining the rate of change in THETA those lost few days... and this in when you see the 'realized' gains in your account.

Again, the difference being... you can absorb movement in the diagonal, unlike the spread, at any moment in time and make an adjustment which typically doesn't have any substantical effect.

M~


Quote from rdemyan:

One other thing I've been wondering about on these diagonals.

You've said and one can see it in the graphs that it is really the last couple of days where the profit is made. I think you've also said that you don't really see a whole lot of movement other than that (assuming that there isn't a huge move up or down in the index).

Does this imply that the debit for the spread doesn't change much over time until the last couple of days.
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Quote from Sailing:





We're playing earnings annoucements, 2-3 weeks prior with Double Diagonals... and playing it as a VEGA play only. It's been itneresting.... and I'll report at the end of the year with some data.

M~
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I have been playing earnings announcements with single diagonals for several quarters now and the results have been average at best. There is the occasional big winner and alot of churning in between. Such distribution doesnt fit me too well but perhaps you are a better stock/vols picker then i am. Though, i would always lean directionally a lil instead of just do a pure vega play so you might do better with having the other side.

Do you intend to hold through the event or close just prior to the volty dump? I have done alot of adjustments into short calendars as well with pretty much the same success/failure. Occasional big winner and alot of churning.
 
thank you. so for the call side of the sp, if not calendars, what is your preferred vehicle structure?

Quote from Sailing:

Theoretically worse.... but in reality it hasn't occured to us in the past six months. Yesterday was a good example of that... the market didn't move... but the VIX was up about 5%.

You're correct in your assumption that in general... being long vega (call calendars) is not a WIN-WIN.

For that reason alone... we don't play the traditional call-calendar strategy. We much prefer the Put-Calendar (3-4 month long, 1-month short). This is a WIN-WIN situation. Increasing VEGA and DELTA into the position.

Now... just a side note. Consider when VEGA increases is associated with both positive and negative delta moves? Just prior to EARNINGs annoucements. Taking that into consideration is where our latest adventure with Double-Diagonals is headed.

We're playing earnings annoucements, 2-3 weeks prior with Double Diagonals... and playing it as a VEGA play only. It's been itneresting.... and I'll report at the end of the year with some data.

M~
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UPDATE CURRENT OPEN POSITION SUMMARY OF SPREADS:


1. SPX August Credit Spread

LIMPING Iron Condor

STO 300 AUG SPX 1125/1115 Put Spreads @ $0.50
Credit = $15,000

STO 150 AUG SPX 1310/1320 Call SPreads @ $0.55
Credit = $8,250

COMBINED CREDIT = $23,250

Return = ~8.4%


2. CLOSED July ES Adjusted Into Put Ratio Spread and Hedges


GROSS NET CREDIT Profit = $14,375



3. ES/EW Call Ratio Diagonal Spread

Long 50 ES Aug 1330 Calls @ 1.60 ($4,000)

Short 45 EW Jul 1300 Calls @ 3.00 ($6,750)
Update EW options expired worthless yesterday, will keep ES longs for now in case we get a nice price spike with FED next week.

Net Credit = $2,750


4. ES Diagonal Put Spread

Sold 20 AUG ES 1225 Puts @ 8.75

Bought 20 SEP ES 1200 Puts @ 11.00

Net Debit = 2.25 or $2,250

VIX = 14.57
 
Like today's data that inflation is still a concern was any shock lol... Investors have short-term memory and that is what makes it gyrate so much. Huge surge and then strong pull-backs. I think the Fed is going to disappoint a lot of people and 1300 is not a threat next week.

How could the Fed pause when inflation has not shown any signs of backing off ;).
 
Quote from optioncoach:

UPDATE CURRENT OPEN POSITION SUMMARY OF SPREADS:

STO 150 AUG SPX 1310/1320 Put SPreads @ $0.55
Credit = $8,250
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SPX 1310/1320 PUT? spread?
 
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