SPX Credit Spread Trader

ADDITIONAL ADJUSTMENT:

1. 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


2. 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


3. I added a short calendar near my call FLY strike. The reason is that the loss graph of a short calendar is inverse of the profit maximum of the Cross Fly. So if the market moves away from the cross strike, the profit in the calendar offsets much of the loss. If I modelled it right, the net credit and profit from the Cross Fly should offset the loss in the calendar to still have a good profit. And if the market falls away from the short strike or moves to high, the net credits also keep the position positive or significantly reduce any losses.

SOLD 15 NOV EW 1380 Calls @ 12.25
LONG 15 OCT EW 1380 Calls @ 4.85

Net Credit = $5,550 or 7.40.



COMBINED NET CREDIT OF ALL = $11,737.50

Moreover, the total risk is still less than the potential max profit, giving me a very nice R/R ratio with potential for a home run or a decent return while avoiding some of the gamma stress from credit or diagonals. (Tplast.. model away if you can using EW).
 
Quote from optioncoach:

I Only problem with haircut is that my sheets do not break out the haircut
More...

Phil,

Ask the people who run the back office at the prop shop if they will provide the haircut breakdowns for you. It's a simple matter for them to do it, if they are willing to spend the small amount of time it takes to plug the trade into a computer.

If you don't ask too often, they should be willing to give you what you need. After all, the more you hedge, the more they earn in commissions.

Mark
 
I will ask because one of the sheet choices for viewings (it is all online) is to see my risk haircut breakdown but it does not show any report. MY haircut right now is $4,500 or so, which is a really nice cut if you ask me, but I expect it to stay pretty low given the deltas until OCT expiration. I wil let you know what I find out.

Quote from dagnyt:

Phil,

Ask the people who run the back office at the prop shop if they will provide the haircut breakdowns for you. It's a simple matter for them to do it, if they are willing to spend the small amount of time it takes to plug the trade into a computer.

If you don't ask too often, they should be willing to give you what you need. After all, the more you hedge, the more they earn in commissions.

Mark
More...
 
Coach
I vowed not to get in this situation again but.....

I have 20 SPX Oct 1365/1375 bear call spread--credit $0.90. I should have closed it when it was 1350 but that deer in headlights thingy happened again.

can you please give me some advice or support. i will seriously evaluate my strategy next time and will never get into this again.

thanks very much in advance....
 
Quote from Heatheranderson:

Coach
I vowed not to get in this situation again but.....

I have 20 SPX Oct 1365/1375 bear call spread--credit $0.90. I should have closed it when it was 1350 but that deer in headlights thingy happened again.

can you please give me some advice or support. i will seriously evaluate my strategy next time and will never get into this again.

thanks very much in advance....
More...

There is no such thing as a repair strategy. If vols had risen then you may have been able to quickly regain the loss on mark to market, but that's not the case here.

The problem with high prob, high risk/reward spreads is the inability to manufacture delta gains. The strategy doesn't lend itself to taking profits.
 
We are about a week too early for the market to hit this level, doesn't it know my diagonal would work better if we were at this level next Thursday :mad:!

I've got a screwy diagonal:

-3 Oct 1365 calls
-6 Oct 1375 calls
+9 Nov 1400 calls

Based on mids I can close for a very small loss, in reality it will be bigger with slippage. Looks like my diagonals will be a wash this month.
 
There are really no repairs for credit spreads, only partial hedges.
That is why picking a line in the sand depening on time to expiration is the best way to train yourself to get out when needed.

Also sometimes it helps to set a mental stop if the credit to close is double the credit received, or to be more forgiving, triple the credit received.

Right now the spread will cost about $3.90 to close, perhaps less.

If you missed your chance 15 points out, then 5 points away from your short strike is definitely a get off the point threshold. You would lose $3.00 now or you could lose $6.00 next week if we get another bonus day like today.

Sometimes it is better to take the loss immediately and examine what was done (even chalking it up to a much stronger move up than expected which is what got me in trouble in my 1340/1360 diagonal) and move on to the next strategy. If you apply the same approach but with a little tighter risk managment you can make it back over time with no problem. Taking small losses is what keeps you in the game. It is not a embarrassing point to run from but a proud moment in your risk management history.

Look how I handled the diagonal spread loss I took. I faced facts that the position was moving against me more than I should have let it and swallowed my pride/ego and took the loss. I was soar and bummed for a few days since I reveiwed and saw my mistakes but I am focused on my new positions and moving forward. I may not make it back this month because my vision and profit targets are long-term.

Read Market Wizards and see how those guys had to eat a position every once in a while. In the long run, nothing but the lessons learned is all you are going to remember...



Quote from Heatheranderson:

Coach
I vowed not to get in this situation again but.....

I have 20 SPX Oct 1365/1375 bear call spread--credit $0.90. I should have closed it when it was 1350 but that deer in headlights thingy happened again.

can you please give me some advice or support. i will seriously evaluate my strategy next time and will never get into this again.

thanks very much in advance....
More...
 
If we keep running higher, I will add the 1405 OCTEW/NOVES/DECES Cross Call Fly and keep taking in premium and keep pushing the right side of the grpah towards and above the zero line.
 
Quote from ryank:

We are about a week too early for the market to hit this level, doesn't it know my diagonal would work better if we were at this level next Thursday :mad:!

I've got a screwy diagonal:

-3 Oct 1365 calls
-6 Oct 1375 calls
+9 Nov 1400 calls

Based on mids I can close for a very small loss, in reality it will be bigger with slippage. Looks like my diagonals will be a wash this month.
More...

Call diagonal is not as sound as the put diagonal, because it hurts by a vol drop. My rut call diagonal is at risk too, but since I made partial hedge when it was 20 points away from my short, I moved the be point to 771. 25% of my potential gain has evaporated today.
 
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