SPX Credit Spread Trader

Quote from rallymode:

Well i am no mo but perhaps it would help if you think of the position as a short straddle. The synthetic compotent allows for better fills and more control over your offset/adjustment.

Previous posts referred to theta decay while being short gamma in a vertical. The suggested position is a pure short gamma play within 1 sigma or two in whatever time interval you follow. The position benefits from theta much much better than a vertical. If market moves towards your short OTM strikes, you will have some delta gains as you have a short bias and vega gains as you originally sold skewed strikes. Throw in some theta decay and you get what risk referred to as an edge to offset or buy the wings. You would want to do that as your deltas are going to invert, shorts puts will carry higher total deltas against your futures. Position requires watching it/trading it actively as you will want to offset leg(s)s on the rallies/pullbacks to stay close to neutrality within your bias.

I am sure mo will add more to it.
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I would add that it's gains to dvega position [fat vegas] over vega gains in terms of smile-sensitivity. The majority of gains are from delta as one would expect.

Be sure to compare the synth straddle premium to the atm straddle. It should give you an idea of the gains that may be seen with a move to neutrality on the "delta straddle" you've sold, synthetically.
 
Quote from Maverick74:

Oh christ, not that dreaded pitchfork again! I thought we killed that thing. :D
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Don't be knockin the pitchfork! Anyway, it's a synth 1x3 ratio, not a 1x2.
 
Quote from riskarb:

I would add that it's gains to dvega position [fat vegas] over vega gains in terms of smile-sensitivity. The majority of gains are from delta as one would expect.


dvega? is that speed on vegas?


Be sure to compare the synth straddle premium to the atm straddle. It should give you an idea of the gains that may be seen with a move to neutrality on the "delta straddle" you've sold, synthetically.

Did one of those delta straddles on aapl the other day as mo chickened out. :D
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Quote from Maverick74:

Yeah, yeah, same difference, unlimited risk.....:(
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Worse than a straddle, but we won't quibble. Not unlike the positions of the largest trader at... VTRADER. Have you coaxed Jeff off the ledge?

Personally, I haven't sold URO in a long time. Exotics are a beauty to behold.
 
Quote from riskarb:

Worse than a straddle, but we won't quibble. Not unlike the positions of the largest trader at... VTRADER. Have you coaxed Jeff off the ledge?

Personally, I haven't sold URO in a long time. Exotics are a beauty to behold.
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Trust me, he is under tight wraps.

Also, I believe your exotics are URO as well no? If you buy a no touch combo with a position in the underlying (long or short), you obviously have unlimited risk on the underlying hedge, albeit offset somewhat by the credit on the exotic, but UR none the less.
 
Quote from Maverick74:

Trust me, he is under tight wraps.

Also, I believe your exotics are URO as well no? If you buy a no touch combo with a position in the underlying (long or short), you obviously have unlimited risk on the underlying hedge, albeit offset somewhat by the credit on the exotic, but UR none the less.
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Are you f*cking kidding? Tight wraps on naked short puts? Right, tell the CME to "take them back!" Mav, we all know the guy IS the firm, and does whatever the f*ck he pleases. The commission statement looks beautiful even with the kickback.

The hedge in spot is solved for a 1:1 risk to the no touch; so the position is lopsided [improved risk] but most are long spot. Add the fact that the majority are < a week in duration. Add the fact that I always carry a deep otm long touch solved to cover the spot risk to the touch hit. Uh, I don't think your guy is buying nuclear puts. I know he swings huge, and so does his equity line.

For your consideration. 50:1 risk on a 2 week short vertical. Sell a 5 lot combo and you can achieve the same return, but the ES would have to trade to *100* to reach 50:1 risk. At least the risk is limited on the vertical. =) God help us all if we hit 100 on spoos.

Phil is a great guy and I congratulate him on that easy 6-large. I know he's having a great year and he deserves it. I only use the 50:1 example to illuminate the fallacy.
 
Quote from riskarb:

Are you f*cking kidding? Tight wraps on naked short puts? Right, tell the CME to "take them back!" Mav, we all know the guy IS Vtrader.

The hedge in spot is solved for a 1:1 risk on the total position; so the position is lopsided[improved risk] but most are long spot. Add the fact that the majority are < a week in duration. Add the fact that I always carry a deep otm long touch solved to cover the spot risk to the touch hit. Uh, I don't think your guy is buying nuclear puts. I know he swings huge, and so does his equity line.

Consider another Vtrader partner. 50:1 risk on a 2 week short vertical. Sell a 5 lot combo and you can achieve the same return, but the ES would have to trade to *100* to reach 50:1 risk. At least the risk is limited on the vertical. =) God help us all if we hit 100 on spoos.

Phil is a great guy and I congratulate him on that easy 6-large. I know he's having a great year and he deserves it. I only use the 50:1 example to illuminate the fallacy.
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Nah, the short put game is over for him. You must not be getting the newsletters anymore. LOL. He is nothing but a glorified daytrader now. And yes, his equity swings are large, but I doubt the SP futures will get halted mid day and gap 30 handles against him. I would say 99% of what he does now is futures. But he has the capital to back his game up. No worries on my end.

As for the exotic, you can solve for whatever you want, if you are long or short a future, you have unlimited risk. Sure in theory, just like with our size trader, the risk is bounded by the fact that you are not going to wake up and see them open 50 higher or lower, but your positions do run against you. I've seen them. You are making a directional bet no matter how you slice it. I'm not criticizing the strategy, I'm just saying in theory, its not bounded.

As for Phil, he knows I don't endorse the credit spreads. He is doing well with them and he seems to have found a new love with the futures trading. I would say Phil's option trading is taking a back seat to his future trading now. He can correct me if I'm wrong. I think he was always a closet futures guy anyway. :D

And for what it's worth Beck, Phil is probably a higher risk trader then Tiv. But that's because of the risk profile of his credit spreads. Hell this entire thread is a re-insurer's worst nightmare. :D
 
Quote from Maverick74:

As for the exotic, you can solve for whatever you want, if you are long or short a future, you have unlimited risk. Sure in theory, just like with our size trader, the risk is bounded by the fact that you are not going to wake up and see them open 50 higher or lower, but your positions do run against you. I've seen them. You are making a directional bet no matter how you slice it. I'm not criticizing the strategy, I'm just saying in theory, its not bounded.
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Bro, you're out of your depth. Read it again, or don't... Take a look at a 2sigma otm long touch payout. It covers my risk on spot. 1:1 risk against the no touch and 2:1 risk at the touch on the average position.
 
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