SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Quote from arbtrader:
I havent checked but that 1330 looks like an OCT to me not a Sept, hence a 30 day naked write (post Sept exp) not a free lunch
It says SEPT. It must be the Dec contract, but the Sept. Call. That must be it. Thanks. "When it seems too good to be true, it probably is."
Question on the diagonals, is there a way to:
1) Estimate what your long leg would be worth at the expiration of the short leg? Assume all else equal - index, IV etc. I feel I should know how to do this already, using theta and days to exp, but I donât seem to
2) Estimate what you could sell a new short leg for if you want to roll into a vertical the next month? Again, all else equal.
I think this is key to understanding and evaluating different diagonals and the prices they trade at.
1) Estimate what your long leg would be worth at the expiration of the short leg? Assume all else equal - index, IV etc. I feel I should know how to do this already, using theta and days to exp, but I donât seem to
2) Estimate what you could sell a new short leg for if you want to roll into a vertical the next month? Again, all else equal.
I think this is key to understanding and evaluating different diagonals and the prices they trade at.
Well nice little rally into the end of the day.... Monitoring my 1310/1320 bear call spread in the SPX. If we get close to 1290, I might roll up and into more contracts until I get past the recent highs...
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
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
Thank you for your insight. I like the idea of balancing your naked calls with naked puts. Sometimes when the market keeps going up, I keep selling more puts to get a better balance to protect myself from a sustainable rally. It is my way of hedging against a threat to shorts.
In a neural market, we will make most profit from our capital IMO. This strategy should serve you very good for the last several years.
Do you use naked writings? Or you only do verticals and diagonals now?
The initial debit is large. You have to do the math and see how much credit you will get when you sell sept OTM. The credit you will get depends on the price and the volatility. If the volatility drops when Aug expires, you probably won't get much credit by selling sep OTM.
I think this flipped double diagonal is good when you expect there will be a big jump in volatility. But then why don't you just trade VIX options if you bet on volatility.
Quote from arbtrader:
Question on the diagonals, is there a way to:
1) Estimate what your long leg would be worth at the expiration of the short leg? Assume all else equal - index, IV etc. I feel I should know how to do this already, using theta and days to exp, but I donât seem to
2) Estimate what you could sell a new short leg for if you want to roll into a vertical the next month? Again, all else equal.
I think this is key to understanding and evaluating different diagonals and the prices they trade at.
You cannot look at theta and deta. These parameters change with price and time. You need to have an option pricing software. You can go to www.888options.com to price your diagonal.
You can also use the position calculator to find out how your total positions change. It is cool stuff b/c you can price any complex combo.
a rough estimate of what the longs will be worth is half of what they were bought for with 30 calendar days left.
to be more precise you have to obviously use an increasing theta amount with days left to calculate it.
to be more precise you have to obviously use an increasing theta amount with days left to calculate it.
Quote from arbtrader:
Question on the diagonals, is there a way to:
1) Estimate what your long leg would be worth at the expiration of the short leg? Assume all else equal - index, IV etc. I feel I should know how to do this already, using theta and days to exp, but I donât seem to
2) Estimate what you could sell a new short leg for if you want to roll into a vertical the next month? Again, all else equal.
I think this is key to understanding and evaluating different diagonals and the prices they trade at.