SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Mark,
If I understand your question... your shorts will expire worthless and you can't buy back your longs because you're maxed out on margin.... and your longs will be exposed the full day on Friday before your broker will allow you to sell short again?
If that's the case... consider rolling into the next months 'diagonal'. Use the roll to help negotiate your b/a.
What we did last month was just sell a 1200p against the 1195p we used in the previous month and turned it into an awesome credit spread... then opened new diagonals.
At the close of this month.. I'll update the group on this past months diagonals... since the unusual bullishness peple are worried about was still and is still very profitable.... and without ulcers.
Just hoping for more Vol....
Maybe tomorrow, Tues, the FED will descend onto the markets... although my FED bias is to the upside.. short term.
M~
If I understand your question... your shorts will expire worthless and you can't buy back your longs because you're maxed out on margin.... and your longs will be exposed the full day on Friday before your broker will allow you to sell short again?
If that's the case... consider rolling into the next months 'diagonal'. Use the roll to help negotiate your b/a.
What we did last month was just sell a 1200p against the 1195p we used in the previous month and turned it into an awesome credit spread... then opened new diagonals.
At the close of this month.. I'll update the group on this past months diagonals... since the unusual bullishness peple are worried about was still and is still very profitable.... and without ulcers.
Just hoping for more Vol....
Maybe tomorrow, Tues, the FED will descend onto the markets... although my FED bias is to the upside.. short term.
M~
Personally.... I like your trade....
Depending on your risk tolerance... we try to sell where we think the market 'could' settle.... since that's the maximum profit area for the diagonal.... ie, 1375c/1350c is what we're looking at for Sept/Oct. Will look to enter when VIX settles below 14.
M~
Depending on your risk tolerance... we try to sell where we think the market 'could' settle.... since that's the maximum profit area for the diagonal.... ie, 1375c/1350c is what we're looking at for Sept/Oct. Will look to enter when VIX settles below 14.
M~
From what I read from Mr. Cot-tle and videos Sheridan put together, Diagonals should be entered in a low vol environment, so I'm assuming that when the VIX drops below 14 your calling that low vol. Question about what your wrote below, are you:
Selling the Sept 1350
Buying the Sept 1375
or the other way around? I've always seen it done where the lower strike is sold in the "front" month and the back month has about a 20-30pt range and is purchased.
Also are you ratio'ing the spread to take in a credit, or are you doing a equal # of contacts in each month?
Is that correct? This will be my first "real money" diagonal. I've done well with paper, but nothing to write home about. I like them more though due to the lesser risk if they are managed properly.
Thanks,
burrben
Selling the Sept 1350
Buying the Sept 1375
or the other way around? I've always seen it done where the lower strike is sold in the "front" month and the back month has about a 20-30pt range and is purchased.
Also are you ratio'ing the spread to take in a credit, or are you doing a equal # of contacts in each month?
Is that correct? This will be my first "real money" diagonal. I've done well with paper, but nothing to write home about. I like them more though due to the lesser risk if they are managed properly.
Thanks,
burrben
Yes, entering when VIX is below 14...
yes, selling the Sept 1350c, and buying the Oct 1375c, not Sept.
When VIX falls below 14, we'll re-evaluate the stike selection.
We also are looking at Put sides... and adding a middle ATM Put diagonal one strike of separation for middle range profits... it's looking very interesting. Will elaborate as the month progesses
M~
yes, selling the Sept 1350c, and buying the Oct 1375c, not Sept.
When VIX falls below 14, we'll re-evaluate the stike selection.
We also are looking at Put sides... and adding a middle ATM Put diagonal one strike of separation for middle range profits... it's looking very interesting. Will elaborate as the month progesses
M~
Hi and just adding to the diagonal discussion. Thought i'd add my actual trade and will update near expiry so we can get a feel of these actual trades' p&l in addition to Murray's and Coach's trades. Details as per my IB account
Trades done on ES. They were legged in using Coach's tip on being aggressive on the first leg and then being a bit more lenient on the second leg to avoid risking the market moving against me.
4th AUG
SHORT AUG1240PUT @ 3.20
LONG SEP 1210PUT @ 6.50
ES ~ 1279.50 VIX 14.75. A little high i know.
Net debit 3.30
So i have a bearish bias, hoping ES will move closer toward 1240 by AUG 18TH.
I chose a 30point distance between strikes compared to Murray's 20 and 25 point between strikes just do see how differently it would behave. Plan to use 20-25 points in the future.
Also my net debit is 3.30. This could be due to opening my diagonal later and the spread between the short and long has widened due to greater time decay of the short option. If i had opened my spread earlier, my debit would have been much less than 3.30. Also higher VIX may also contribute to the increased debit.
If ES keeps moving higher..then there should be some small losses on the diagonal. So here's hoping it moves down. Don't mind the losses as this is a small position for tuition.
Coach and Murray, looking forward to your position updates
Trades done on ES. They were legged in using Coach's tip on being aggressive on the first leg and then being a bit more lenient on the second leg to avoid risking the market moving against me.
4th AUG
SHORT AUG1240PUT @ 3.20
LONG SEP 1210PUT @ 6.50
ES ~ 1279.50 VIX 14.75. A little high i know.
Net debit 3.30
So i have a bearish bias, hoping ES will move closer toward 1240 by AUG 18TH.
I chose a 30point distance between strikes compared to Murray's 20 and 25 point between strikes just do see how differently it would behave. Plan to use 20-25 points in the future.
Also my net debit is 3.30. This could be due to opening my diagonal later and the spread between the short and long has widened due to greater time decay of the short option. If i had opened my spread earlier, my debit would have been much less than 3.30. Also higher VIX may also contribute to the increased debit.
If ES keeps moving higher..then there should be some small losses on the diagonal. So here's hoping it moves down. Don't mind the losses as this is a small position for tuition.
Coach and Murray, looking forward to your position updates
Murray,
Won't your ATM Put diagonal be a little risky? So if the SHORT of your diagonal is initiated ATM and SPX moves down, won't your position be losing on paper.
I understand from your previous positions, if SPX moves down towards your OTM short diagonals, your position is not losing on paper. Could even be winning due to VIX with help from theta.
Thanks
Thought people might be interested in this
1 year SPX data as of Fri Aug 4, based on the daily close
highest close 1,325.76
lowest close 1,176.84
best day 26.87
worst day -23.55
average up day 6.40
average down day -6.65
average up 30 day* 20.53
average down 30 day -28.18
best 30 day 78.56
worst 30 day -70.55
average up 45 day** 27.22
average down 45 day -29.92
best 45 day 88.53
worst 45 day -86.03
1 year STDV 34.61331717
*21 business/market days
**32 business/market days
1 year SPX data as of Fri Aug 4, based on the daily close
highest close 1,325.76
lowest close 1,176.84
best day 26.87
worst day -23.55
average up day 6.40
average down day -6.65
average up 30 day* 20.53
average down 30 day -28.18
best 30 day 78.56
worst 30 day -70.55
average up 45 day** 27.22
average down 45 day -29.92
best 45 day 88.53
worst 45 day -86.03
1 year STDV 34.61331717
*21 business/market days
**32 business/market days