SPX Credit Spread Trader

Quote from scoobie27:

Hi all,

Im trying to understand the greek numbers that Im seeing in the options analytics page in IB.

eg SPX at 1275 and im looking at AUG 1240 PUT

Mid price $3.45

Theta is -0.5232

Does that mean the option will lose $0.5232 (52cents) with each passing day or



yes.


it will loose 0.5232 of 1 cent each day. ie $0.005

If it decays by ~ 0.50cents, it seems too much as the options has around 10 days to expiry and in 10 days the decay will roughly be $5 all else being equal. This is more than the value of the option.

If it decays by ~ 0.5 of 1 cent, that means its losing half a cent a day which is too little. 10days = 50cents. I know the theta will increase exponentiallly as we approach expiration, but $0.005 cent at the moment is too small?



True for ATM options. Since it is far OTM, the curve is different. Theta changes with time, and changes with price.


And is it the same with VEGA? Does 0.53 mean a 53 cent increase in option value for each 1 percent increase in VIX?

Sorry for the newbie question but i just cant get my head over this. Thanks in advance and i'll probably response tomorrrow as im signing out for the day.
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It means 53 cents for 1% increase in volatility.
 
thanks
arbtrader,coach and others for your answers. Sometimes it hard to admit i am wrong because of my ego. But i am here to learn and make money, not to be right :D
 
Thanks Percy,

0.50 cents decay sounds better than 0.005. But I still think its too much for an OTM option.

0.50 x 10days = $5

Current option price ~ $3.20 :confused:

I would understand better if theta is currently around 0.20 and increasing as we get nearer to expiration.
 
Grid anaylsis is my daily routine of taking an overall picture of the market. First starting with weekly, daily, 81 minute and then 15 minute. I see which timeframes are impulsing and look for confluence and divergence between the different timeframes. Looking at waves, overlapping pivot highs and lows and some other of my TA. The only indicator I use is 50 and 200 EMA, if thats the ma you saw. I suggest looking at some material from Robert Miner. His techiniques work on all markets, all timeframes and are perfect for getting optimum entry on these spreads.


Quote from burrben:

Apex,
I'd be interested to hear what you mean by "grid analysis". I did some searching back on your previous posts, and couldn't find any posts dealing with the topics. I did find your trading station though and I must say, nice setup. On you upper right monitor it looks like you have some type of interesting smoothed moving average....reminds me of the old movie Tron with the light cars.

Anyway, great job.

burr.
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Quote from scoobie27:

Thanks Percy,

0.50 cents decay sounds better than 0.005. But I still think its too much for an OTM option.

0.50 x 10days = $5

Current option price ~ $3.20 :confused:

I would understand better if theta is currently around 0.20 and increasing as we get nearer to expiration.
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As it gets nearer to expiration, theta actually decreases if the spx stays the same for OTM options.
 
Need clarification..

Sept/Oct?
or
Sept/Nov?


Quote from burrben:

Just would like some opinion on this potential trade. I'm going to be travelling in Aug during Ex, so I'm not trading Aug Ex. Which means I have $$ burning a hole in the pocket.

I'm thinking of capturing some premium by entering a diagonal, selling Sept and buying Nov. Using TOS pricer, it looks like I could:
Sell the SEPT 1375
Buy the OCT 1400
for a debit of 0.40

Does this trade make sense? Or short I just continue to do vert's?

peace,
burr
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Anyone has suggestions on Sep vertical or sep/oct diagonal?

Is it better to wait till fed meeting? Should we continue to open new positions and ignore any news or events?
 
I am waiting for the FED before entering my next diagonal. I am looking at the Calls and the SEPT ES and AUG EW (end of month calls) on the ES futures options.
 
Question for anyone with diagonal experience (Murray - that's you):

Assume my account cannot hold naked short options:

If I am unable to buy in my short Aug options on Thurs, will I be allowed to sell out my long Sept options on Friday?

I asked Interactive Brokers and they said no; then reconsidered and said that I 'should' be able to do so. I also asked the OCC and awaiting a reply.

I ask because my broker will not release the margin requirment for the August calls until Monday. That makes me fear that they will not allow me to sell the Sep options until Monday.

BTW, I will buy of my shorts that I can for 5 or 10 cents, but there are not always sellers at that price.

Mark
 
The brokerage will traditionally hold the margin until Monday. However, once the settlement price is announced on Friday, you should be able to call your broker and ask them to release the margin. I use OX and they will do this on Friday.

Quote from dagnyt:

Question for anyone with diagonal experience (Murray - that's you):

Assume my account cannot hold naked short options:

If I am unable to buy in my short Aug options on Thurs, will I be allowed to sell out my long Sept options on Friday?

I asked Interactive Brokers and they said no; then reconsidered and said that I 'should' be able to do so. I also asked the OCC and awaiting a reply.

I ask because my broker will not release the margin requirment for the August calls until Monday. That makes me fear that they will not allow me to sell the Sep options until Monday.

BTW, I will buy of my shorts that I can for 5 or 10 cents, but there are not always sellers at that price.

Mark
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