SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Here is a position for Sep that I am considering putting on today, it is a triple diagonal ala Sailing:
STO Sep 1250p
BTO Oct 1225p
current mid = 2.75
STO Sep 1275p
BTO Oct 1250p
current mid = 2.90
STO Sep 1325c
BTO Oct 1350c
current mid = 1.60
This gives me a profit window from around 1245 to 1331 according to ToS with current volatility. If I drop the lower puts or raise the calls I get into a potential loss situation between the shorts. I'm not sure how comfortable I am with the positions above being as they provide a relatively narrown profit window. Comments anyone?
STO Sep 1250p
BTO Oct 1225p
current mid = 2.75
STO Sep 1275p
BTO Oct 1250p
current mid = 2.90
STO Sep 1325c
BTO Oct 1350c
current mid = 1.60
This gives me a profit window from around 1245 to 1331 according to ToS with current volatility. If I drop the lower puts or raise the calls I get into a potential loss situation between the shorts. I'm not sure how comfortable I am with the positions above being as they provide a relatively narrown profit window. Comments anyone?
One thing that is interesting about your proposed put position is that it is an OCT/SEP 1250 Calendar Spread with a 1275/1225 Put Diagonal surrounding it.
If we look at it like this, we might get a better sense for what the position would do in certain situations intuitively.
If we look at it like this, we might get a better sense for what the position would do in certain situations intuitively.
I am not sure if you got the right breakeven point. It seems to me that when spx is at 1250, you might have significant loss (10 pts?, my guess) from the 2nd position, and I am not sure if the first diagonal can make enough gain to compensate for it.
I don't have TOS and so my intuition might be wrong.
I like your position, but I would have hoped to have it opened last Friday.
We're looking at Put Calendars, not Call Calendars.
With the VIX as low as it currently is... it much favors the Put side of the market. If you place a Call Calendar and the market continues up... you'll lose VEGA.... probably still profit... if you're ratioed... etc. But if you're playing the call side.. hoping for volatility to increase... then I would suggest the Put Calendar.
Remember, a Put Calendar can be applied to take additional upside movement in the market... ie Dec 1300p/Sept 1300p
My personal opinion is that the market is giving away cheap 'puts' right now... buying OTM puts is ON SALE right now. Not withstanding that the market direction favors the upside in the short term... let's also remind ourselve of OCT seasonality.
In summary... it's a great time for buying 'put's.... put diagonals.
M~
With the VIX as low as it currently is... it much favors the Put side of the market. If you place a Call Calendar and the market continues up... you'll lose VEGA.... probably still profit... if you're ratioed... etc. But if you're playing the call side.. hoping for volatility to increase... then I would suggest the Put Calendar.
Remember, a Put Calendar can be applied to take additional upside movement in the market... ie Dec 1300p/Sept 1300p
My personal opinion is that the market is giving away cheap 'puts' right now... buying OTM puts is ON SALE right now. Not withstanding that the market direction favors the upside in the short term... let's also remind ourselve of OCT seasonality.
In summary... it's a great time for buying 'put's.... put diagonals.
M~
UPDATE CURRENT OPEN POSITION SUMMARY OF SPREADS:
1. SPX August Credit Spread
LIMPING Iron Condor
Net Profit after Friday AUG Expiration$22,500
2. AUG ES/JULY EW Call Ratio Diagonal Spread
FINAL Credit Profit = $3,100
3. ES Diagonal Put Spread
Sold 20 AUG ES 1225 Puts @ 8.75
Bought 20 SEP ES 1200 Puts @ 11.00
Net Debit = 2.25 or $2,250
20*40 SEP ES 1200/1190 Put Ratio Spread
New Net Debit = $650.00
---------------> AUG Es expired worthless. Today I sold 40 SEP ES 1190 Calls at 0.80 for a credit of $1,600 and converted to a 1200/1190 Put Ratio Spread. So my net debit is reduced greatly, even though technically I increased the risk. The reason I was fine with this trade off is that I do not see ES dropping to 1200 in the current environment by SEPT expiration.
1. SPX August Credit Spread
LIMPING Iron Condor
Net Profit after Friday AUG Expiration$22,500
2. AUG ES/JULY EW Call Ratio Diagonal Spread
FINAL Credit Profit = $3,100
3. ES Diagonal Put Spread
Sold 20 AUG ES 1225 Puts @ 8.75
Bought 20 SEP ES 1200 Puts @ 11.00
Net Debit = 2.25 or $2,250
20*40 SEP ES 1200/1190 Put Ratio Spread
New Net Debit = $650.00
---------------> AUG Es expired worthless. Today I sold 40 SEP ES 1190 Calls at 0.80 for a credit of $1,600 and converted to a 1200/1190 Put Ratio Spread. So my net debit is reduced greatly, even though technically I increased the risk. The reason I was fine with this trade off is that I do not see ES dropping to 1200 in the current environment by SEPT expiration.
I currently have some ES SEP1230P/OCT1200P diagonals in place from a few days ago.
Margin required to add contracts is about $700 per contract, on a 30 point spread with a max risk of 30*$50=$1500.
For comparison, what if I were to buy the SEP1290P/OCT1260P. The SEP short is basically at the money. Margin per contract on this would be $1300.
You can see from this that the margin for a diagonal also rises as the market moves toward your short, and falls as time remaining in the short expires. So you have to be careful about how you have margin allocated depending on what trades and strategies you have employed.
Margin required to add contracts is about $700 per contract, on a 30 point spread with a max risk of 30*$50=$1500.
For comparison, what if I were to buy the SEP1290P/OCT1260P. The SEP short is basically at the money. Margin per contract on this would be $1300.
You can see from this that the margin for a diagonal also rises as the market moves toward your short, and falls as time remaining in the short expires. So you have to be careful about how you have margin allocated depending on what trades and strategies you have employed.
I like the fact that span margin falls when it is close to expiration. It free up the margin for the next month positions ithout actually closing FOTM positions which will mostly likely expire worthless.
By looking at the figures, it seems span gives around 2 times the leverage compared to regular margin.