SPX Credit Spread Trader

Could someone please remind me how I can determine 1 sigma within ToS. I believe it is on the Analyze tab and Probability Analysis. But I'm hung up on what to do next.

Thanks.
 
Mayve I am just tired from lack of sleep but I am gonna have to read the above DD discussion a few times before I get what was being side. It was like risk talking to himself lol....
 
As much as this is painful I have to put down my noob trades for today. Here were my SPX positions prior to closeout:

1350/1360 - $0.80
1250/1260 - $0.50
Total Credit = $1.30

Being busy at work I noticed later SPX was climbing 1344+, ran home to make the exit, and paid a painful $5.50 to exit out of my call spreads close to 1350. :mad: Should have looked to exit this AM when SPX hit 1399 but I figured 1400.33 resistance would hold.

Ryank I should have gone out at that $3.85 the other week huh? :D Anyways, I also closed the put side for $0.15 cents because I realized I didn't have enough credit in my account to closeout ONE final call spread!!

So it was 1) close all call spreads except one, 2) close all put spreads to free up margin, 3) close remaining ONE call spread.

I'm looking at opening some 1375/1385 tomorrow to help offset. Currently showing $1 x $1.6 with a $1.4 mid and $1.15 last trade.

Hard Lessons Learned today to use on a go-forward basis:

1) Lower trade % of funds down to 75% from ~80%

2) Clarification of 10 points bailout rule: If the market even touches within 10 points even when I notice it later, I will exit the trade. The fact that the SPX goes lower does not matter and will be a plus as I will pay less debit to exit the trade.

3) I'm thinking about changing #2 above to a 15 point bailout rule. However, my rules today call for a 15 point bailout prior to ^SET.

4) Had I not been in a rush, close out put side first completely, then closeout the call side.

Any suggestions, inputs, or ideas are appreciated!

Thanks in advance, Flint
 
Quote from optioncoach:

Mayve I am just tired from lack of sleep but I am gonna have to read the above DD discussion a few times before I get what was being side. It was like risk talking to himself lol....
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Good night sweet prince:
And flights of angels sing thee to thy rest!

Seriously, I'd value your {wakeful} opinion on risk's DD points.
 
Quote from rsflint:



2) Clarification of 10 points bailout rule: If the market even touches within 10 points even when I notice it later, I will exit the trade. The fact that the SPX goes lower does not matter and will be a plus as I will pay less debit to exit the trade.

3) I'm thinking about changing #2 above to a 15 point bailout rule. However, my rules today call for a 15 point bailout prior to ^SET.


Any suggestions, inputs, or ideas are appreciated!
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Here is an idea and it isnt meant as criticism. Have you evaluated how a CTM spread would perform under those same rules? Being closer to the market would reduce your risk and also allow you to exit at or around your long strike vs within arms reach of your short. It might very well end up still being the same SPX level but you enjoy less risk and more flexibility as gamma will be more forgiving.

Anyway, dont want to start another debate on the issue as it has been beaten to death but thought i'd point it out. Just something to think about in your own trading style. :)
 
Quote from rallymode:

Here is an idea and it isnt meant as criticism. Have you evaluated how a CTM spread would perform under those same rules?
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No I haven't but I'm interested in doing so. Currently I trade around 1.5 sigma. Do you trade 1 sigma or are you using support and resistance or both??

Being closer to the market would reduce your risk and also allow you to exit at or around your long strike vs within arms reach of your short.
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I'm not sure I understand. I'm opening credit spreads so I can't let SPX go through my short strike and to the long strike.

It might very well end up still being the same SPX level but you enjoy less risk and more flexibility as gamma will be more forgiving.

Anyway, dont want to start another debate on the issue as it has been beaten to death but thought i'd point it out. Just something to think about in your own trading style. :)
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Actually I'm interested in looking into this some more. A buddy of mine at work who does SPX credit spreads is thinking about doing a "mixed" approach next month: CTM spreads and the regular spreads we have been doing.

Thanks Rally!
 
This round of bullish move, is it due to the act by hedge fund ?

Housing Down, Oil Down, Commodity Down, Large Cap Up, sector rotation by hedge fund ?

Any one has this feel ?
 
Quote from rsflint:

Do you trade 1 sigma or are you using support and resistance or both??

Well, that would depend on your own directional skills. I would match the distance to the success of your signals.

I'm opening credit spreads so I can't let SPX go through my short strike and to the long strike.

Says who? You can do whatever you want. I am currently sitting on a spread that is ITM. Remember your r/r will go from 1:15 to like 1:2/1:3. Once your risk is reduced this dramatically by being closer to the market, you no longer need to worry about all that short gamma. You now have the flexibility/choice to close when you want and based on how you feel about the market at that point and not because you must to protect your portfolio. To me such flexibility/choice is worth in gold, but i understand that some find comfort in the high probability of FOTM strikes. Example, next time you do those FOTM verticals, place a 5 pointer on paper with a long strike at or slightly below your predetermined 15-point barrier of exit, just try to get the r/r i mentioned earlier. Track the PnL along the way and you will see what i am talking about then you can draw your own conclusions and adopt a style that suits your signals.

This all sounds too good rally, whats the catch. Well, there is a catch. The PnL of the FOTM vertical will outperform the last week of the cycle with a move towards that 15 point predetermined barrier, if the move doesnt happen or happens earlier in the cycle, the CTM PnL is ahead by far. It's a tradeoff you might be willing to make, and as i said it would depend on your signal.
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So, after all the wonderful conversations here about Put Diagonals, I decided to give it a try about 4 weeks ago for Oct./Nov 1265/1250 put diagonal when SPX was at about 1314.

Things were going along swimingly. Even slight rises in the SPX made the position okay. I was still in the black at 1330-1335. I found it absolutely amazing how the short position would lose money at a faster rate than the long position, thus increasing profit. But this recent rise to 1350 has made me lose faith in the put diagonal, so I closed out for a 12% loss today while woulda-coulda-shoulda thinking about my more usual put credit spreads that I would have been able to close out today for a nice bit of money in my pocket.

I think I'm going back to FOTM credit spreads, where I know how much I will make each time and I have been much more successful. This waiting around stuff for the spike in volatility and for the market to come to its senses and fall back to its proper range is tiresome. Good luck to others as the SPX will probably now drop to 1320 after I have closed out my position.
 
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