SPX Credit Spread Trader

[El OchoCinco]

Interesting. Yes the REG T is high when I was modeling this on SPX lol.

I was testing Call and put short calendars. The only thing that looks viable is to short an OTM Call calendar. If the market keeps moving lower, the extra credit reduces the loss dip and raises the lowest breakeven point.

On the upside it raises profit slightly but great adjustment to reduce risk by half! Play around and see if you get the same on ES since I am using SPX.

INTERESTING NOTE: I am experimenting also with different ratios. For example doing 25/50/25 FLY but only doing 10 or 20 of the short calendars. Try it....

Looking into getting OptionVue to model the complex ES spreads....

Quote from tplast:

Span for equivalent on ES cross fly at 1385 and short calendar at 1360 is $9,268 initial and $8,518 maintenance. Taking into account the credit received, span will vary from $1,030 to $5,600 depending on when and where ES trades.

RegT goes as high as 1.5M :eek:

 

[tplast]

Quote from optioncoach:


Looking into getting OptionVue to model the complex ES spreads....

Get the trial package to see if you like it. You have to pay about $50 for it, but you get the full printed documentation and DVDs. I you decide to buy they'll refund the cost of the trail.

 

[rallymode]

Quote from Buzo:

I am watching the stock - RNVS
its implied volatility is over 200
I want to establish a position that can benefit from an evaporation of the IV

I am looking for a combination of positions that will be:
1. Delta neutral (without having any naked calls or naked puts)
2. Negative Vega to benefit from an evaporation of IV

Any ideas?

I guess I should also be concered about the Gamma (because of the expectation of serious volatility) but is their a position that meets the two criteria above.

short calendar. long gamma, short vega. however, when it comes to RNVS(its on my watchlist), the time hasnt come IMO. Trigger event date is still up in the air. Best guess is sometime in the nov exp cycle. Gamma too expensive at this point.

Perhaps, stay on topic next time.

 

[El OchoCinco]

Tplast:

I modelled on this downward jump and cmae up with the following adjustment which I added for real. Hopefully you can model it for me and give me a screen shot if you have time.

My original position 1385 25*50 Call Fly

SHORT 25 OCT EW 1385 Calls @ 2.50 (+$3,125.00)

LONG 50 NOV EW 1385 Calls @ 9.75 (-$24,375.00)

SHORT 25 DEC EW 1385 Calls @ 21.00 (+$26,250.00)

NET CREDIT = $5,000 or 4.00 * 25


I took advantage of the downward drop to add a put cross month FLY at or near the loss trough of the original position.

I added the following:

SHORT 25 OCT EW 1330 Puts @ 4.70 ($5,875)
LONG 50 NOV ES 1330 Puts @ 10.50 ($26,250
SHORT 25 DEC ES 1330 Puts @ 17.25 ($21,562.50)

NET CREDIT = $1,187.50 or .95 * 25

COMBINED NET CREDIT = $6,187.50 or 4.95*25


If I modelled this correctly it should raise most of the risk graph up higher and increase the profit potential. Someone with OptionVue can lend a hand until I get mine .

Avoided EW options as best as I can for the PUT so I can model better and stay within DEC expiration. OCT had to be EW to match my first short wing in the calls.

ALSO: Selling the OTM call calendar is still an option for more credit and adjusting the risk profile.

 

[tplast]

Quote from optioncoach:

Tplast:

I modelled on this downward jump and cmae up with the following adjustment which I added for real. Hopefully you can model it for me and give me a screen shot if you have time.

Sure coach, will be glad to do it. I have to run to a meeting right now, but will do it later today and post the graph.

 

[El OchoCinco]

We gonna have to talk about this putting others things before me crap...

Ok I will wait until your meeting is done. I want to know how far above the zero line it pushes the position. My modelling shows it all goes above the zero but mine does not account for the DEC EWs or the OCT EWs differences....

Moreover, add in selling an OTM calendar spread (OCT/NOV). i think one or two strikes below the 1385 Fly is a good place to start. It also has a nice effect.

I think legging into this complex positions as the market moves can lead to some very profitable positions with limited risk.

Thanks!

And gonna order the 1 month trial of Option Vue...

Which data provider do you use/recommend (you can PM in private if you want on this issue)?

 

[Buzo]

Thanks for the info.
I appologise for interupting the flow of the discussion.

Quote from rallymode:

short calendar. long gamma, short vega. however, when it comes to RNVS(its on my watchlist), the time hasnt come IMO. Trigger event date is still up in the air. Best guess is sometime in the nov exp cycle. Gamma too expensive at this point.

Perhaps, stay on topic next time.

 

[yip1997]

Quote from optioncoach:

For the position I put on, my daily sheets show a haircut right now of about $6,000 so the return on haircut is so much better than Reg T lol.

Adding the short calendar gives some options but it depends on when it is added. Still simulating it before I am convinced....

Seems a different ball game with haircut. There is no way to make good money with this strategy under reg T.

 

[RichardRimes]

Hey Coach...not to get off topic but did you do an FOTM credit spread in your retail account for the month of OCT? I know you didn't have time for one in Sept. It seems to me you did a Bear Call spread ....any update on that? Will you continue to do them? Thanks!

While I'm enjoying the discussion of these time fly's I agree with Yip, no way us little retail customers could do these.

 

[El OchoCinco]

Quote from optioncoach:

Still open as well...

SPX CREDIT SPREAD POSITION

SOLD 400 OCT SPX 1385/1390 Put Spreads @ $0.30

Net Credit = $12,000

Max Risk = $188,000

Return = 6.4%


Partial hedge given the shorter distance OTM:

Long 100 OCT SPY 138 Calls @ $0.20 or $2,000


COMBINED NET CREDIT = $10,000

Combined Net Return = 5.26%