SPX Credit Spread Trader

For call diagonals looking right now at the following:

150 Short AUG EW 1310 Calls @ 2.15 ($16,125)
135 Long SEP ES 1330 Calls at 1.40 ($9,450)
(approximate pricing)

Net Credit of $6,675

I still do not see much upside strength through August end of month expiration and perhaps I could benefit from September rally.. ;)

Gonna watch this and see if I want to get filled..
 
Murray has more history with this, but I review what is going on in the market to determine whether I take the profits in the long, let it run or roll into something else....

Quote from yip1997:

Coach and Murray,

For diagonal, when the front month expires, do you normally close your position?
More...
 
Quote from optioncoach:

Murray has more history with this, but I review what is going on in the market to determine whether I take the profits in the long, let it run or roll into something else....
More...

FWIW, the bulk of profits in diagonals outside of favorable volatiltiy activity is locked up in the (multiple) rolls which is why it's important to understand calendar's (roll value) e.g. when it's best to roll and to estimate likely yields etc.

2 cents.
 
Quote from momoneythansens:

FWIW, the bulk of profits in diagonals outside of favorable volatiltiy activity is locked up in the (multiple) rolls which is why it's important to understand calendar's (roll value) e.g. when it's best to roll and to estimate likely yields etc.

2 cents.
More...

Mo,

I don't understand what you meant. Can you explain with an example? I have aug/sep put diagonal. How can I have multiple rolls?

I opened rut aug/sep 650/630 put diagonal with a debit of 2.7. Can you use it as an example?
 
Quote from yip1997:

Mo,

I don't understand what you meant. Can you explain with an example? I have aug/sep put diagonal. How can I have multiple rolls?

I opened rut aug/sep 650/630 put diagonal with a debit of 2.7. Can you use it as an example?
More...

Multiple rolls: when there is more than one month between front and back month e.g. aug/oct gives you two roll opportunities.

Obviously the further out the back month the greater the initial debit - but you have to balance that against estimated multiple roll credits to evaluate risk/reward. Obviously, sideways markets like last year and the beginning of this year were ideal for multi-month market neutral double diagonals. You have to take a view on whether we are likely to see that kind of price action again and place your diagonals accordingly.

MoMoney.
 
I can't figure out how to get a fill for a diagonal. I put in a debit order .10 over the mid. I left for a while and now the spread is showing a credit at the mid and no fill. What am I doing wrong? :confused:
 
Quote from momoneythansens:

Multiple rolls: when there is more than one month between front and back month e.g. aug/oct gives you two roll opportunities.

Obviously the further out the back month the greater the initial debit - but you have to balance that against estimated multiple roll credits to evaluate risk/reward. Obviously, sideways markets like last year and the beginning of this year were ideal for multi-month market neutral double diagonals. You have to take a view on whether we are likely to see that kind of price action again and place your diagonals accordingly.

MoMoney.
More...

Mo,

Do you mean that a diagonal is best for neural market because of the faster time decay in the front month, and you use multiple credits to generate the profit? This perspective is different from vega bet as shown by Murray's diagonal.

For neural markets, I think verticals probably will generate more credits for diagonals.
 
Hey there,

Just hanging around waiting for the VIX to be below 14 again to try and get filled on a Put Diag, so I was reading our good friend, Mr. Cot-tle.

I went to his website and noticed that he also offers online videos explaining the concepts.
http://www.riskdoctor.com/webinars.html

Can anyone comment on the quality of these videos and if they might be worth the price of admission? They are not too terribly expensive, but not a drop in the bucket either.

Coach, maybe you could haggle with your floridian friend and get us 50% off!

Burr...
 
Quote from yip1997:

Mo,

Do you mean that a diagonal is best for neural market because of the faster time decay in the front month, and you use multiple credits to generate the profit? This perspective is different from vega bet as shown by Murray's diagonal.

For neural markets, I think verticals probably will generate more credits for diagonals.
More...

I was referring to double diagonals for neutral markets rather than single diagonals which are admittedly different beasts. You will find much higher ROI potential embedded in diagonals vs credit spreads but don't take my word for it.

The rolling is just one of the many ways discussed on ET of legging into a position for less than fair value if you were to open the position from scratch. It's an attempt to "build expectancy" by first taking on some risk. If you're lucky with multiple rolls you can end up being paid to own a position which has further potential with no risk.

It's not an either or with respect to vega. So no, it's not a different perspective from Murray's. If there is a favorable move in volatility and the spread responds nicely, you may opt to take profits or take advantage of the situation for other adjustments. However, in the case that the volatility pop doesn't come along then you are relying on theta to make your money and this is where rolling comes in. Again, an understanding of calendars (embedded in diagonals) makes this obvious.

With any option position you can take it to expiration, in which case only the final price matters and all greeks go out of the window at exp. or you can hope that dynamic activity prior to expiration is in tune with the desires of the position and this is where the greeks come in.

I could write pages more but...

MoMoney.
 
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