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SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Hi
I am holding some Aug 1300/1305 bear call spreads. Now there is gap of 2.5 points between index and spread value.If I close that is the loss (minus the premium collected) I need to take. If I don't close, will the max loss be more than 2.5 points per spread? Depends on SET, right. I know I am sitting on edge, feeling uncomfortable but I see some resistance and the thinking of "taking loss only when necessary..."
Any thoughts??
I am holding some Aug 1300/1305 bear call spreads. Now there is gap of 2.5 points between index and spread value.If I close that is the loss (minus the premium collected) I need to take. If I don't close, will the max loss be more than 2.5 points per spread? Depends on SET, right. I know I am sitting on edge, feeling uncomfortable but I see some resistance and the thinking of "taking loss only when necessary..."
Any thoughts??
Quote from fumablanc:
Hi
I am holding some Aug 1300/1305 bear call spreads. Now there is gap of 2.5 points between index and spread value.If I close that is the loss (minus the premium collected) I need to take. If I don't close, will the max loss be more than 2.5 points per spread? Depends on SET, right. I know I am sitting on edge, feeling uncomfortable but I see some resistance and the thinking of "taking loss only when necessary..."
Any thoughts??
Your breakeven is at 1300+premium you received. If SET is 1305 or above your loss is $5-premium taken in. What did you originally sell the 1300/1305 bear call spread for?
Yes, it does depend on the SET with regards to what your loss may be (if any). The SET could be higher or lower than today's close or could be just about the same.
Just so you know, there have been times in the past where the SET was over 20 points higher or lower than the SPX close on Thursday (not very often). However, 5 to 10 points either higher or lower is not uncommon.
Do you want to take the risk is the question. I've seen a few very savvy, experienced traders not be careful with the SET and they had all of their margin wiped out on the trades because the SET moved against them.
Remember, that when the market closes today and you have an open credit spread potentially in trouble, there is nothing you can do tomorrow.
Myself, I close if I'm less than 15 to 20 points away (depends on market momentum, sentiment, etc.). Others may be willing to take a bigger risk.
Just so you know, there have been times in the past where the SET was over 20 points higher or lower than the SPX close on Thursday (not very often). However, 5 to 10 points either higher or lower is not uncommon.
Do you want to take the risk is the question. I've seen a few very savvy, experienced traders not be careful with the SET and they had all of their margin wiped out on the trades because the SET moved against them.
Remember, that when the market closes today and you have an open credit spread potentially in trouble, there is nothing you can do tomorrow.
Myself, I close if I'm less than 15 to 20 points away (depends on market momentum, sentiment, etc.). Others may be willing to take a bigger risk.
Quote from fumablanc:
Hi
I am holding some Aug 1300/1305 bear call spreads. Now there is gap of 2.5 points between index and spread value.If I close that is the loss (minus the premium collected) I need to take. If I don't close, will the max loss be more than 2.5 points per spread? Depends on SET, right. I know I am sitting on edge, feeling uncomfortable but I see some resistance and the thinking of "taking loss only when necessary..."
Any thoughts??
Quote from rdemyan:
Myself, I close if.... Others may be willing to take a bigger risk.
If you choose NOT to close, what do you on Friday? Are you able to either sell out (or sell something to spread against) your remaining (in this case) September options?
Is there a problem with selling your Sept to clsoe the position?
My broker (IB) would block the sale of the options because they would consider me to be naked short the August options, even though those options no longer contain any risk.
Mark
After SET is announced TOS releases all the margin on Friday, usually around noon or a little later.
For a vertical credit spread, as far as I know, there is nothing you can do. You are totally at the mercy of where the SET falls.
I would assume that the September option remains as a single which I guess depending upon your broker you may or may not be able to do anything with on Friday (as per your posts on this subject). I haven't traded diags yet so haven't encountered this. I use ToS and I think someone posted that ToS will release the margin on Friday, which would seem to imply that a back month remaining long could be traded.
Edit: If you don't close out the front month option by today, then it would seem to me that it is totally at the mercy of where the SET falls and you can't do anything about that front month short tomorrow.
I would assume that the September option remains as a single which I guess depending upon your broker you may or may not be able to do anything with on Friday (as per your posts on this subject). I haven't traded diags yet so haven't encountered this. I use ToS and I think someone posted that ToS will release the margin on Friday, which would seem to imply that a back month remaining long could be traded.
Edit: If you don't close out the front month option by today, then it would seem to me that it is totally at the mercy of where the SET falls and you can't do anything about that front month short tomorrow.
Quote from dagnyt:
If you choose NOT to close, what do you on Friday? Are you able to either sell out (or sell something to spread against) your remaining (in this case) September options?
Is there a problem with selling your Sept to clsoe the position?
My broker (IB) would block the sale of the options because they would consider me to be naked short the August options, even though those options no longer contain any risk.
Mark
Quote from rbsanders:
Would appreciate some thoughts. I am normally a directional trader but have started doing some credit spreads. I have 1315-1325 and 1320-1330 August. Would close or roll at about 10 points from short positions At what point today if it does not get that high do I need to worry about the set tomorrow.
Thanks
rb no one can answer that for you. Each individual trader has a number of reasons for doing what they do. I'm sitting here with 1295 shorts:eek: and may or may not do anything, for a lot of reasons. Others with 1330 may have already closed their spread. Coach has said in the past and I think most agree that you should consider closing if you are less than 20 pts and definitely close if you are less than 10 pts.
Quote from rdemyan:
If you don't close out the front month option by today, then it would seem to me that it is totally at the mercy of where the SET falls and you can't do anything about that front month short tomorrow.
Yes. All I am asking is if anyone has had a similar problem, or do all other brokers do as TOS does, and free margin on Friday.