SPX Credit Spread Trader

[IV_Trader]

OC , next time when SPX vols will hit the roof ( like in the summer) , instead of hedging the spread with VIX options , consider this :

enter a 1$ a 5 point put spread.
enter a 4 $ a 15-20 points call spread.

obviously no need to protect the downside . If market goes up that will guarantee vix to collapse . You also will have enough time to roll/adjust/protect your short call strike.

 

[El OchoCinco]

If vols spike I assume the market will have fallen quite far from the short call strike. I have not modelled this yet but my assumption is that the delta loss in the spread, and thus a profitable scenario, will out weigh any negative effects of vol spikes. Therefore, if the market falls far from the call strikes, I would not think of hedging. To me hedging is more if the market moves towards my short strikes.

Also, I did not follow the 1$ a 5-point or a $4 a 15-20 point thingy. What were you saying?

Quote from IV_Trader:

OC , next time when SPX vols will hit the roof ( like in the summer) , instead of hedging the spread with VIX options , consider this :

enter a 1$ a 5 point put spread.
enter a 4 $ a 15-20 points call spread.

obviously no need to protect the downside . If market goes up that will guarantee vix to collapse . You also will have enough time to roll/adjust/protect your short call strike.

 

[IV_Trader]

Quote from optioncoach:

If vols spike I assume the market will have fallen quite far from the short call strike. I have not modelled this yet but my assumption is that the delta loss in the spread, and thus a profitable scenario, will out weigh any negative effects of vol spikes. Therefore, if the market falls far from the call strikes, I would not think of hedging. To me hedging is more if the market moves towards my short strikes.

Also, I did not follow the 1$ a 5-point or a $4 a 15-20 point thingy. What were you saying?

no , you enter this trade AFTER big spike in vols. You take an OTM puts spread for a buck ( 2-3-4% away form ATM , whatever will be available then , like 1280-1285 , 5 point spread). Same with call spread for 4$ on a 15-20 points. If market tanks big , you guarantee to break even. If its goes up , vols must go down then.

 

[ChrisM]

Quote from optioncoach:



I have 2 different adjustments lined up based on tomorrow's price action. For those of you about to ask the question.. YES! this time I really checked the numbers and did it on paper to make sure lol... I will reveal the potential adjustments tomorrow as we see what the market does.

Coach,

wow, this the highest time to put it on TV.

 

[El OchoCinco]

Not sure if that is really a hedge after an IV spike. If I put that on after the spike and the market rallies I could lose big on the call spread no? After the IV spike I would most likely want to add a reverse calendar of sorts (perhaps ATM puts...).

Quote from IV_Trader:

no , you enter this trade AFTER big spike in vols. You take an OTM puts spread for a buck ( 2-3-4% away form ATM , whatever will be available then , like 1280-1285 , 5 point spread). Same with call spread for 4$ on a 15-20 points. If market tanks big , you guarantee to break even. If its goes up , vols must go down then.

 

[El OchoCinco]

Read it several times...... still do not understand what you said lol

Quote from ChrisM:

Coach,

wow, this the highest time to put it on TV.

 

[ChrisM]

Quote from optioncoach:

Read it several times...... still do not understand what you said lol

I mean with this market action and tension growing you would make first action TV program about trading I`ve ever seen

 

[rsflint]

Quote from kalikahuna:

Uhh..again, how are we continuing to go even further up? It's almost like the market is so close to the top that it kinda artificially is pushing it there.

I hear ya and feel the same way..how can it go higher? I'm hearing the August 2006 housing #s are funny..maybe it's the republican conspiracy?

I was thinking now might be a good time to buy some SPY puts or a put diagonal.

Aloha

 

[rdemyan]

On the lighter side of things:

++++++++++++++++++++++++++++++++++++++++++++++
ATHENS, Greece (Reuters) -- Prostitutes and smugglers will give the Greek economy an unexpected boost as their illicit activities will now be counted in the country's official economic output, a senior official said on Wednesday.

Under pressure from the European Union to cut its deficits, Greece is revising its gross domestic product to include part of the booming black economy, boosting its output by at least 10 percent in 2006, the country's chief statistician told Reuters.

"The revised GDP will include some money from illegal activities, such as money from cigarette and drinks smuggling, prostitution and money laundering," National Statistics Service chief Manolis Kontopyrakis said in an interview.

Greece's economic output was 180 billion euros ($228 billion) in 2005 and is estimated at 194 billion euros this year, while the black economy is estimated at about 40-60 billion euros a year.

Copyright 2006 Reuters. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.

+++++++++++++++++++++++++++++++++++++++++++++

 

[El OchoCinco]

Yeah.... we should call it....



LOST!

Quote from ChrisM:

I mean with this market action and tension growing you would make first action TV program about trading I`ve ever seen