SPX Credit Spread Trader

cdowis · Sep 27, 2006

/es6eg is the symbol in tos for es.

Crucis · Sep 27, 2006

Quote from RichardRimes:

Thx but when I right click and go to charts nothing comes up...

Ahhh, ToS, like OX and many others, use Prophet.net for interactive charts. Choose TOS Charts. Works for me.

ChrisM · Sep 27, 2006

Quote from optioncoach:

Nice roller coaster today huh...

Even for those of you who do not trade futures intraday, you really should just watch a 5minute chart of the ES each day and get a visual on what is happening intraday.... quite fascinating.

And for me a little profitable lol..

But no pullback yet ?

Sold some bull put 1350/1340 to hold it for longer along with long ES.

scoobie27 · Sep 27, 2006

Quote from ChrisM:

But no pullback yet ?

Sold some bull put 1350/1340 to hold it for longer along with long ES.

Chris,

Self explanatory but did you mean bear call ?

dagnyt · Sep 27, 2006

Quote from scoobie27:

You have told me in the past that you open new diagonal positions irrespective of direction whenever the DOW moves around 50 points. That translates to roughly every 5 point move in the SPX or ES. So im assuming that you would have opened new positions in stages during this current move between 1250 and the current price of roughly 1340 and higher. In this rather strong upward move of the last two months, would some of the short strikes in your call diagonals have been hit and if so what has been your risk management of those diagonals. Have you been forced to close those that have been touched and opening up new OTM diagonals? Have you also been continually opening PUT diagonals at higher strikes as well to balance them with your call positions?

1) Luckily for me, I'm essentially 'all in' so have added just a couple of tiny call spreads over the past few days.

2) So far, I have been ok (lucky) with my Oct shorts. No strikes have yet been breached. But, one is getting close to the money (RUI 730) and I doubt that I can get away with holding. But, for now am not doing anything.

3) I carry many small positions (near 30 as I write this). Last month (Sep shorts) I was not as fortunate. and was forced to cover 4 different spreads. But, even with that, I was very pleased with my return, asI earned about 90% of my monthly goal.

4) Every time I covered a Sep/Oct diagonal, I opened a new Dec/Nov diagonal. Each roll was done for a net cash credit.

5) I have not yet added new put positions, as my portfolio is balanced (I was short too many put diagonals last month - and that worked out well. Now I am balanced.)

6) I am looking to close some Sep/Oct put diagonals that are far OTM. I don't want to lose the remaining credits in those positions. Once closed, I'd use the freed up margin to add new spreads (mostly puts).

Thanks for asking. Hope you are doing well.

Mark

RichardRimes · Sep 27, 2006

Quote from ChrisM:

But no pullback yet ?

Sold some bull put 1350/1340 to hold it for longer along with long ES.

you SOLD? so you are very bullish...humm at first I thought it was a debt spread and since puts are so cheap right now I decided to look at them. Put an order in to buy a 1330/1320 spread for 2.20 don't know if it will fill but what the heck

tplast · Sep 27, 2006

Quote from dagnyt:

Interesting point of view. A trader's point of view - and a very good diea for anyone who considers himself to be a trader.

I am not a trader. I am a money manager and a risk manager.

I open positions and let the profits take care of themselves. My job is to make sure risk stays in line and that losses are not allowed to get out of control. As I said, making money is easy - the tough job is to keep losses at acceptable levels.

Mark

Of course there are not right or wrong approaches for everyone, but I'd argue that scalping against your positions is a way of reducing risk and improve your b/e by booking realized gains against your unrealized p/l. I prefer the set and forget positions, but sometimes you have to get dirty

dagnyt · Sep 27, 2006

Quote from tplast:

Of course there are not right or wrong approaches for everyone, but I'd argue that scalping against your positions is a way of reducing risk and improve your b/e by booking realized gains against your unrealized p/l. I prefer the set and forget positions, but sometimes you have to get dirty

Obviously, each trader/investor must trade according to principles that fit his comfort level. But, how does taking a leg reduce risk?

Sure, if you COMPLETE a scalp, you get to book some realized gains and make extra money. But, b/a spreads are very wide and getting into and out of positions is both difficult and costly. One must be VERY right on the initial leg of the scalp attempt to make this strategy profitable.

And what happens if the leg you attempt to scalp runs against you? How quickly is one supposed to cut losses?

I have the utmost respect for anyone who has the ability to consistently make money by scalping the market. (I lack that ability)

The only time I attempt to scalp the market occus when I own a position with positive gamma (and thus have the deltas to scalp). Speaking for myself (a risk manager, not a trader) I recognize that I am a bad predictor of market direction and thus, avoid scalping. If you can do it - congrats.

Mark

scoobie27 · Sep 27, 2006

Quote from dagnyt:

1) Luckily for me, I'm essentially 'all in' so have added just a couple of tiny call spreads over the past few days.

2) So far, I have been ok (lucky) with my Oct shorts. No strikes have yet been breached. But, one is getting close to the money (RUI 730) and I doubt that I can get away with holding. But, for now am not doing anything.

3) I carry many small positions (near 30 as I write this). Last month (Sep shorts) I was not as fortunate. and was forced to cover 4 different spreads. But, even with that, I was very pleased with my return, asI earned about 90% of my monthly goal.

4) Every time I covered a Sep/Oct diagonal, I opened a new Dec/Nov diagonal. Each roll was done for a net cash credit.

5) I have not yet added new put positions, as my portfolio is balanced (I was short too many put diagonals last month - and that worked out well. Now I am balanced.)

6) I am looking to close some Sep/Oct put diagonals that are far OTM. I don't want to lose the remaining credits in those positions. Once closed, I'd use the freed up margin to add new spreads (mostly puts).

Thanks for asking. Hope you are doing well.

Mark

Thanks for the reply Mark,

Just trying to get a feel for how you're handling your risk as Im moving in similar direction in addition to credit verticals and diagonals.

3) Having to close only 4 positions in this strong up move and still achieving 90% monthly profit goals sound pretty good to me! Looks like the strict risk management is paying dividends. If Sep was not fortunate I wonder what how a fortunate month would look

I have 7 very small positions on my IB portfolio page compared to your 30 and my head is already spinning monitoring them. My current threatened short strikes are ES 1360 (Oct credit vertical) and 1380(Nov credit diagonal). ES is currently 1346.75.

Plan to close the 1360 spread if ES moves 10 pts higher. No procrastinating

i hope :eek: Have priced what I'll have to pay to close if ES hits 10 pts higher and its not too bad (Around 5.00 and initially sold for 2.00) Plan to open higher strike diagonals in stages as ES moves up.

I have also open smaller sized PUT diags to get some credit there as I don't like opening larger sizes as the underlying is moving up.

As you said, everyone have slighly different strategies, and I do have my version, but its along the lines of your general strategy.

Thanks again for taking the time to answer and good luck to your trading too.

Cheers
Scoobie

PS no reply needed for this post as Im sure you're busy

tplast · Sep 27, 2006

Quote from dagnyt:

Obviously, each trader/investor must trade according to principles that fit his comfort level. But, how does taking a leg reduce risk?

Sure, if you COMPLETE a scalp, you get to book some realized gains and make extra money. But, b/a spreads are very wide and getting into and out of positions is both difficult and costly. One must be VERY right on the initial leg of the scalp attempt to make this strategy profitable.

And what happens if the leg you attempt to scalp runs against you? How quickly is one supposed to cut losses?

I have the utmost respect for anyone who has the ability to consistently make money by scalping the market. (I lack that ability)

The only time I attempt to scalp the market occurs when I own a position with positive gamma (and thus have the deltas to scalp). Speaking for myself (a risk manager, not a trader) I recognize that I am a bad predictor of market direction and thus, avoid scalping. If you can do it - congrats.

Mark

I'm also very bad at predicting market direction. But I'm talking about trading against your position using the underlying. Gamma scalping, except that in this case I'm thinking short gamma instead of the most commonly done long gamma.

For example, I'm now -408 futures equivalent deltas. So I go long 4 contracts on dips and sell them 1 or 2 points higher. Rinse and repeat.

The position is delta neutral at entry, but if we continue down or time passes the gains on my position will be greater
than the loss on the futures.

[EDIT] While holding the futures, I have black swan exposure. So I bought 4 1300 puts against them as insurance. Those I don't scalp, just leave them in place.