SPX Credit Spread Trader

The put diagonals on the SPX or ES are for a net debit and there could be a loss if the market runs higher and keeps going and VIX falls. However, unless the move is huge, the long options should still have some time value premium to reduce the loss.

Although it is a possibility, there will be times when the market drops and the VIX increases and the position will have nice to significantly large profits. So occasionally a partial loss on a few may be necessary. However I entered the diagonal not really expecting this market to run away and therefore still look to make some profit.

I am home today and do not have my ES quotes up but if someone wants to check the ES quotes on my diagonal they can confirm that the position, at the last prices traded yesterday was flat to slightly up due to greater theta in the AUG month than SEPT.

Quote from yip1997:

Coach,

I am interested to see how your diagonal is doing so far.

When the market is moving away from your front month short, I think the diagonal will lose money. That is something we need to consider, and it seems that we don't have a lot of discussion in this matter.
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You can easily open a credit for a diagonal using CALLS on the SPX or ES, as I did with my AUG/JULY diagonal and I was not that close at all to the current market. I think I was about 40 points away or so.

If the market moves to my short strike, like it started to yesterday, it actually leads to a nice profit for me because I ratioed my position. So the longer-term Calls I have at AUG at 1330 will help offset moves in the lesser number of EW 1300 Calls. Moreover if the market looks like it will settle in between my short and long strike at expiration, it is a simple roll to AUG to turn the spread into a bull call spread for AUG and still have a net credit. There are a lot of options ;) if it moves to your short strike and in fact it is better if it does given the profit potential.

This is the point that Sailing Murray has made that the diagonals do not cause upset stomachs like vertical credit spreads when the market approaches your short strike.

Quote from yip1997:




If you open a diagonal with credit, it means you have to set the strike very close to the current price (compared to a debit diagonal), and you have a higher chance of facing risk #2.
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As requested:

ES 1276 VIX 15.06

ES AUG 1225P 3.00 x 3.35
ES SEP 1200P 6.25 x 7.00

Offset the AUG @ 3.25 and SEP @ 6.50 gives a credit of 3.25. +1 ahead of the inital 2.25 debit.


Quote from optioncoach:
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
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Just Wait..... the real money will be seen on TUESDAY !

Hold On!



Quote from jeffm:

As requested:

ES 1276 VIX 15.06

ES AUG 1225P 3.00 x 3.35
ES SEP 1200P 6.25 x 7.00

Offset the AUG @ 3.25 and SEP @ 6.50 gives a credit of 3.25. +1 ahead of the inital 2.25 debit.
More...
 
Hi all,

Question about cutting into the b/a on the SPX, this didnt get filled today:

BTO 20 1150 / STO 20 1160 put spread net credit of .20
SPX @ 1267

1150 was .50 - .70
1160 was .70 - 1.00
aka 0 / .50

Then it went to
.50 - .65 and
.70 - 1.00
aka .05 / .50

But they wouldn’t fill it at .20
Is this typical?
fyi OI is about 176k and 14k
 
with the market going down the MM's can get picky...yesterday I had no problem with the 1200/1175 at .70 but the truth is lower than that...the MM's know they will lose so they will be tight. 1160/1150 will be very tough to fill at this point. (for Aug)
 
Quote from arbtrader:

Hi all,

But they wouldn’t fill it at .20
Is this typical?
fyi OI is about 176k and 14k
More...

yes...even tho there is OI and volume its so far freaking otm the MM's don't really want it. you might get filled for a dime
 
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