SPX Credit Spread Trader

It's looking like there are a lot of interesting possibilities with regular and EOM options on futures. I'm gonna have to call Joel again at ToS and push them along (if possible) on getting those options on futures for us.

Quote from optioncoach:

New Experimental Put Calendar Spread:

OK here is the position first and then i will explain it after (I did only 1 contract each to test this out).

BOUGHT 1 OCT EW 1290 Put @ 12.00 ($600 EOM Options)

SOLD 1 SEP ES 1290 Put @ 2.50 ($125)

NET DEBIT = $475.00

RATRIONALE:
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Attached is a ten-year chart that shows a relatively tight correlation between the S&P 500 and the NAHB housing market index.
The stock market is normally about 12 months behind the housing index (as indicated on the chart--S&P 500 "lagged 12 months"). It looks like the housing index peaked last July and we're on the edge.
 

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Quote from rdemyan:

Attached is a ten-year chart that shows a relatively tight correlation between the S&P 500 and the NAHB housing market index.
The stock market is normally about 12 months behind the housing index (as indicated on the chart--S&P 500 "lagged 12 months"). It looks like the housing index peaked last July and we're on the edge.
More...

Great study, no matter sometimes correlations can die with no reasons. This one might work however, after hitting our Sep shorts. LOL

But seriously - it might be very true. The recent trend is somewhat strange - almost no corrections, string-looking chart and awfully expensive calls while OTM puts almost for free.
 
Quote from rdemyan:



RATRIONALE:
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YOU TOO:p this must be the new spelling and I missed the memo...I actually had something constructive to say. I decided after brief experimentation that ES hedging the way I envisioned it doesn't work.

1) ES trades 24/7 thus you can too easily get sold out of limit stops or might get an order put on then taken out.

2)gaps, very hard to trade gaps

3)need too much babysitting. I'm out of town tomorrow and Fri no way can I play with ES effectively.

If anyone does have consistent success using them as hedges to the SPX trade please SHARE:)
 
Quote from RichardRimes:



If anyone does have consistent success using them as hedges to the SPX trade please SHARE:)
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I use them successfully for hedging ES options, but previously also did for SPX options.
 
one more question Chris...how do you control the gaps? This morning the gap blew past my stp/limit and I had to close manually for a full point below the stop.
 
Quote from RichardRimes:

Chris do you use a formula? what is your ratrional? (I'm a conformist)

one more question Chris...how do you control the gaps? This morning the gap blew past my stp/limit and I had to close manually for a full point below the stop.
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OK, my Ratrionale :D :

I don`t use precisely a formula. I scale them depending on how far we are OTM, spread width etc.


Gaps - I mostly use OTM options to protect them, so I don`t deal with gaps this way. However if I occasionally use stops, I do it on intraday basis only, so there is no such problem whatsoever.
 
I closed the call side on my sep IC this morning for 0.20 and sold the OCT 1335/1350 bear call spread for 5.5

With the increase in volatility on the last two days and today's drop, my put diagonals are now showing a nice profit. I like how they lose value very slowly even if the market moves far away from them but increase in value really fast with just a little drop.
 
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