SPX Credit Spread Trader

[tplast]

Quote from jychiu:

I am trying to see what is the tick in IB for future option, managed to figure it out.

Use Coach recent diagonal put as an example of selling the SEP EW 1340 and bought the OCT ES 1360..

The tick in IB is ES. last night with ES Sep Future ESU6 at $1305.25
ES Sep 1340 Call Future Option EWU6 $4.80b $5.50a (select EW class)
ES Oct 1360 Call Future Option ESV6 $4.15b $4.50a (select ES class)

The commission should be $1.65/contract in IB for option future.

Anyone could advise me what much is the margin required in IB ?

Future options use SPAN margin. Without software, there is no easy way to calculate the margin requirement as it takes into account your complete position on each underlying. What's more, the margin required changes constantly depending on time to expiration, volatility and movement of the underlying.

For a single put diagonal, with no other positions, the maintenance margin increases as time passes and as the underlying moves towards your short and decreases as volatility increases.

On IB, you can select the order and right click on "check margin". This will show you what your margin requirement will be (including existing positions) if your order is executed. You want to have at least twice as much available as this doubles overnight plus a good reserve to be able to keep the position as market conditions change.

 

[rallymode]

Quote from Prevail:

yes M, what is the rational behind selling the march back month?

cover the front month close to expiry and short the back month turning the diagonal into a short calendar to benefit from the subside in vols which usually happens soon after the trigger event. Of course, you need a few things to line up nicely before and after you adjust for you to get out clean but not a bad strat actually. Much better than a FOTM credit spread under the same conditions.

 

[El OchoCinco]

I think the diagonals are good, I think using them with ES and EW futures options makes them great with even more adjustment and position choices. Once you start using the options on futures I think you might not touch the SPX for diagonls lol....

Quote from Sailing:

I told you ..... it may take a while to break yiou from some of those old habits..... (put credit spreads, but you'll soon be converted to a...

"D.D" devil yourself

M~

 

[tplast]

Quote from optioncoach:

I think the diagonals are good, I think using them with ES and EW futures options makes them great with even more adjustment and position choices. Once you start using the options on futures I think you might not touch the SPX for diagonls lol....

I don't trade the SPX anymore for that reason and because of better margins, but most importantly because the execution is a lot better. On the ES, I'm getting instant fills at the middle or +/- one tick most of the time.

You have to leg in, but since the execution is so good you can complete the spread without too much risk.

 

[rallymode]

Quote from tplast:

On the ES, I'm getting instant fills at the middle.

I highly doubt that on anything over 2 lots. On spread orders(given you can place them as spreads) it will never happen. Maybe on single legs once the market moves against you the bots will fill you instantly. Diagonals with ES/EW filled at mid? Dreaming.

 

[ChrisM]

Quote from rallymode:

I highly doubt that on anything over 2 lots. On spread orders(given you can place them as spreads) it will never happen. Maybe on single legs once the market moves against you the bots will fill you instantly.

I understand you doubt, but no matter sometimes I have to leg in myself, at many times I get filled for 100-300 contracts, ES/EW 10 pts. spreads in the middle.

 

[rallymode]

Quote from ChrisM:

I understand you doubt, but no matter sometimes I have to leg in myself, at many times I get filled for 100-300 contracts, ES/EW 10 pts. spreads in the middle.

How far out are the strikes? I am yet to see an instant single leg fill at the mid on any ES option > $2 on more than 10 lots unless the futures move against me first and i can still swipe the stale quote on the other leg to finish off the combo. EW is much worse. Diagonals, even more so.

 

[ChrisM]

Quote from rallymode:

How far out are the strikes? I am yet to see an instant single leg fill at the mid on any ES option > $2 on more than 10 lots unless the futures move against me first and i can still swipe the stale quote on the other leg to finish off the combo. EW is much worse. Diagonals, even more so.

About 30-40 for calls and 60-70 for puts pts OTM. But sometimes I have problems as well. It comes and goes.

 

[El OchoCinco]

SPX bounce off of MA support (20 EMA and nice lunch bounce. Of course, what happens between 2 - 4 will see if this was just covering or some buying coming in.

Those of you looking at OCT puts, look at 1215 or 1220 if there is still any premium. 1240 is on the edge of pushing it given the July low of 1225 (hence the 1215/1220 area to start out with).

On the call side, 1340 at the lowest but 1360 would be preferred. However, right now the premiums are very small.

 

[El OchoCinco]

Yes, I leg into all my spreads with ES and EW but I have not had a problem shaving a tick off the bid or ask for ES. EW is a little wider but you can still shave some. There is certainly enough liquidity to get a fill at my numbers (100 - 300 contracts).

Quote from tplast:



You have to leg in, but since the execution is so good you can complete the spread without too much risk.