SPX Credit Spread Trader

Mo,

You write so elegantly.... that I think we should nominate you as the official ET secretary. Besides, you're one of just a few who can interpret Riskarb.

You have my vote.... MoMoney for ET Secretary !



Need to run... but Mo summed up things well. With diagonals you can profit from a VEGA move during the duration of the trade... or allow it to expire and play the 'greeks' as they lie.

As for rolling... we have turned next month out options into current month credit spreads, if the strike price warrants.

Getting filled... like coach says... all depends on a number of factors... one being Volatility.. but also strike price open interest. LIke I mentioned before... we like to stay at $25 multiples because of the liquidity being traded at those strikes.

It's no majic... as I tell the Investment Club members... you need to bait the hook... or you won't catch any fish. Keep those MM's busy looking at your offers.... they'll bite when they get hungry.

M~





Quote from momoneythansens:

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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Man, I am sorry I did not pull the trigger on this one, especially the way the gains of the day melted away at the end... next pop we haeve gonna add call diagonals...

Quote from optioncoach:

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..
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>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.

A further month spread also means greater vega risk to that larger debit. Be sure that you are at the low end of IV.

> 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?

There are no "quotes" for speads, only taking a combination of quotes for the options themselves. It's called the natural bid/ask. Also a spread can only be filled from one exchange, not taken from multiple exchanges. The natural bid/ask quote may be from different exchanges (not sure) but a fill only comes fr one exchange.

Also liquidity may be an issue. Not enough interest in the back month option.

If you are concerned about not being filled at your price, you can always try to leg in at different exchanges.
 
Quote from cdowis:

> 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?

There are no "quotes" for speads, only taking a combination of quotes for the options themselves. It's called the natural bid/ask. Also a spread can only be filled from one exchange, not taken from multiple exchanges. The natural bid/ask quote may be from different exchanges (not sure) but a fill only comes fr one exchange.

Also liquidity may be an issue. Not enough interest in the back month option.

If you are concerned about not being filled at your price, you can always try to leg in at different exchanges.
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I'm thinking if I ever want to get filled I will have to leg in, not an ideal situation but may be the only way to get a fill. I just checked the volume on the puts I was trying to get and they both had good numbers today so I'm not sure what is going on. I should have time tomorrow to see if I can leg in, I will keep baiting the hook :).
 
Remember not all products are traded on all exchanges. The CBOE has the SPX to themselves.
http://www.cboe.com/Products/Cash-SettledIndexOptions.aspx

This means that you can leg into a spread but since the vehicle we use to trade is only traded on the CBOE, entering a trade as a spread doesn't really make much difference.

I have heard that if your order is at the mid and it's not getting filled either cancel and replace the order, then it will go to the top of the mm's book, or call the tradedesk(tos) and they will help you. I have recieved excellent service and fills whenever I decided to burn some calories and pick up that thing you push buttons on and talk into, I forget it's name.....

burr.

Quote from cdowis:

If you are concerned about not being filled at your price, you can always try to leg in at different exchanges. [/B]
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Coach,

If you don't mind a quick refresher, why did you decide to go with ES options using haircut margin at Mav's VS. SPX options using haircut margin at Mav's VS trading ES options at IB with SPAN margin.

Just trying to get it straight in my head.

Peace,

burr...
 
summa trades calendars 100+ points away for a credit. I think he does okay but with such small risk reward, one bad trade takes a while to overcome.

bottom line is he runs a pool. if someone is managing opm and doing seminars, are they really doing that well?

Quote from rbsanders:

anyone familiar with John Summa of the Options Nerd Site and his seminars pro or con tia
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I like the spreads and liquidity (most times) of the ES options over the SPX for the prop account. I still use the SPX in my retail account.

As for IB, not a fan of the platform but that is just a personal preference.

There is no right or wrong answer here really, just what you prefer :D.

Quote from burrben:

Coach,

If you don't mind a quick refresher, why did you decide to go with ES options using haircut margin at Mav's VS. SPX options using haircut margin at Mav's VS trading ES options at IB with SPAN margin.

Just trying to get it straight in my head.

Peace,

burr...
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Quote from ryank:

At least you are getting filled. I can't get filled for the life of me :p.
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But I'm only getting filled at the mid or 10 or 20 cents worse. Nowadays I just put my order dead on the mid and let it get filled when SPX moves against me.

So in reality, im probably getting filled a dime or two worse than mid. Rarely, or probably never do i get filled a dime or two better than mid :mad:

Yip,

The date Murray put on the the diagonals in July is similar to the time I'm putting them on now in August. So why the different price for similar parameters ? But I'll hassle Murray more on this :)
 
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