SPX Credit Spread Trader

Quote from RichardRimes:

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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I agree, when you are dealing with options individually or spreads that are way way way out of the money, usually you will have to sell on the bid, and buy on the ask. That is why far out of the money spreads are tough to sell when time gets short.

Cody

(Just my experience!)
 
Quote from optioncoach:

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 ;).
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Ya no kidding Coach..I was starting to wonder. 12 year high GDP and 11 year high manufacturing key price index and we get no crank on 8/8?? Hello Mcfly!!!?!?

Makes me feel a little bit better I was wondering if I was going to have to bail out of my 1300/1310 bearish call spread.
 
The closer it gets to expiration, the less negotiation on the bid/ask. SPX is somewhat better then OEX. RUT is even less.
More than 4 weeks out @ 50% (midpoint)
3-4 weeks out @ 30%
0-3 weeks out @ 25%

I've noticed unusual fills can be had during lunch time.

.20 sounds reasonable though. This might work out in your favor. Try again tomorrow if a further move down.


Quote from arbtrader:

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
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Best fills... between 11am-1pm EST

Just our experience.



Quote from ffa99:

The closer it gets to expiration, the less negotiation on the bid/ask. SPX is somewhat better then OEX. RUT is even less.
More than 4 weeks out @ 50% (midpoint)
3-4 weeks out @ 30%
0-3 weeks out @ 25%

I've noticed unusual fills can be had during lunch time.

.20 sounds reasonable though. This might work out in your favor. Try again tomorrow if a further move down.
More...
 
Ever really look at a candle chart of the VIX. Did you notice the majority of the candles are RED? (not necessarily relating to a downtrend over time... but rather intra-day)

Can we conclude that SELLING in the morning and BUYING at the close is preferential from a volatility point-of-view.

That said.... I have also noticed in backtesting systems.... those which buy on End-Of-Day signals... perform statistically (significantly) better than those who confirm a signal at EOD, and buy in the 'morning on open'.

just a little FYI
 
coach (and other's...)

i know it has been discussed before; but we all do change opinions sometimes.

when a credit spread turns bad, a .5 credit can become a 10pt debit, being a massive loser. of course there is protective hedging, but it is never 100%. bottom line,when your short is attacked, there is much scrambling and losses/rolls, etc.

now.......why not (post still pertains to credit spreads) a much further ootm naked short. all this credit trading is based on the odds of success, so it would make sense going further out , the odds increase? again, if your short is breached, there is trouble, big possible loses. why not just go further down or up the line? i even can argue that when my naked short is attacked, a roll down and out is easy and even profitable. yes, i understand that the margin for spreads is fixed, and my naked future options span margin will go through the roof, no one said it was easy.

as you can see from my posts, i am not very prolific, but if it were not for the success of this thread, none of these ideas such as double diagonals, ratio's, and naked writing would ever get the airplay we all need. i am grateful. i am not a thread starter, but.....if anyone would be interested in starting(coach) a naked future option thread; i know i would really try to make it successful.
 
thanks for all the replies, great great info

well despite not getting filled, I think I picked a good entry. The spread actually turned NEGATIVE this morning (slight debit). I think I correctly identified it as over valued yesterday.

which brings me to my next question.

in looking as these spreads, I see something I wouldnt expect, which has attracted my "arbitrage minded" way of thinking.

As the put spreads get further and further OTM, I would expect the net credits to rather uniformally decline. Sometimes they do. Sometimes they dont. The calls do (deep ITM bull spread) and are exactly what I'd expect. For example, a 15 point bull call spread deep ITM goes from about 14.5 debit then to 14.6, then 14.7 and so on as you get deeper ITM and their premiums really just reflect cost of carry. A few fluctuations, but not enought to make an arb spread on.

but the puts are different. Instead of the credits going down in an orderly fashion from say a dollar (arbitrary starting point) to .90, .80, .75, .70, and so on, they sometimes hop all over. Sometimes a deeper OTM put spread is showing a higher credit than a less OTM one, or a much higher credit than an only slightly more OTM one.

I see some interesting possibilities here, and am wondering if anyone else is doing it? My only concern is that I may be presuming too much about how much you can cut into the b/a. my "opportunities" may be false positives that are triggered by an overly high ask that is dragging up the midway point.
 
Quote from arbtrader:


I see some interesting possibilities here, and am wondering if anyone else is doing it? My only concern is that I may be presuming too much about how much you can cut into the b/a. my "opportunities" may be false positives that are triggered by an overly high ask that is dragging up the midway point.
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I have never been able to take advantage of a situation like this. I have tried many times but never gotten a fill. I think it is as you said, "false positives" that throw the mids off.
 
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