SPX Credit Spread Trader

Quote from optioncoach:

Glad I made you all happy...

:D
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phil,

i generally dont disagree with your trades but this one is a lil out there man. Certainly, its a high prob setup given your style but I am clueless as to how you will hedge all that gamma if it starts gearing on you.
 
How does the expectation of Phil's current trade differ than the expectation for the majority of his other credit spread trades? Why the sudden panic, since there is always huge gearing in these trades?

I am short puts right down to 1280 and might even have some of the other side of Phil's short.

-segv
 
With regards to gamma and theta and all that....doesn't it simply come down to if those options expire worthless, he gets the full credit amount? I don't understand why there's always so much talk about the greeks, I guess. If someone cared to explain why it's that important in a PM I'd be more than happy to learn the dire significance.

Thanks
 
Always glad to see good risk discussions. It should always be brought up. This position pushes my normal strike selection but with 6 trading days left I feel that we will not drop that far and I am trading on the fact that the 1255 strike will not be touched by the end of next week. I see some support at 1280 range and will use that as an initial risk measure.

Also, this position will not blow up my account but I appreciate the sentiment and concern.
 
Quote from segv:

How does the expectation of Phil's current trade differ than the expectation for the majority of his other credit spread trades? Why the sudden panic...

-segv
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Because the credit was only 20 cents.

Yes, the probability of success is very high, but the reward is far too small (IMHO).

Mark
 
Quote from tplast:


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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I noticed that as well. My 1240/1260 diag stayed pretty much at b/e above 1310, although I would start worrying at 1315. Moved down, vix up, and voila.

But it really tests my patience, but I don't get panicky as I did doing verticals.
 
Sure all the greeks go to zero with an OTM expiration but my point was the impossibility to hedge cheap gamma during last week of trading should we head lower from here. Usually phil does much better than this, hence my surprise. Phil, remember last time you tried to get cute during the last week? Your credit was nt nearly as bad. Complecancy after a good August? :)

Anyway, having said that, I am sure there's 99% probability or something like that we won't touch the short strike but should we get near it, its all a gamble, no hedging, no trading.

Just my opinion as i am sure phil will come out just fine. /rant
 
Quote from segv:

How does the expectation of Phil's current trade differ than the expectation for the majority of his other credit spread trades? Why the sudden panic, since there is always huge gearing in these trades?
More...

his other trades can be hedged somewhat. This one cannot.
 
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