SPX Credit Spread Trader

riskarb · Oct 19, 2006

Quote from yip1997:

Thanks a lot for educating me. I prefer short gamma with long dgamma. Never tried it though.

np, but there is no single market strategy that touches long dgamma and short gamma.

riskarb · Oct 19, 2006

Quote from optioncoach:

I think the cross month FLYs and diagonals can make money in any market environment depending on whether you are choosing puts or calls, it all comes down to strike selection and position management.

I think the cross month FLYs have elements of diagonals and verticals that I like but with limited risk and practically no haircut.

With the ES, EW and SPX cross month FLYs I have on, my haircut is currently just under $6,000. It goes without saying that the figure is not my max RIKS, just the margin requirement.

Can be said of any strategy if your criteria is perfect strike selection. I am referring to the convex PnL indicative of its delta and gamma position. The fact remains that that position earns best at the strikes, which were 30+ handles otm.

yip1997 · Oct 19, 2006

Quote from riskarb:

np, but their is no single market strategy that touches long dgamma and short gamma.

There is no simple strategy for long dgamma and short gamma, but a complex combo might do?!

I can also short gamma and take the gamma risk for a short period of time, and establish long dgamma when certain risk level is reached. Gamma doesn't increase much in the beginning, and if you can establish long dgamma before close to expiration, you have reduced your risk significantly. Is that true?

I appreciate your comments as usual before I risk my real money.

El OchoCinco · Oct 19, 2006

True, but I am working on stretching a few strikes across the current range of prices and having several strikes where the profit maxes out. It lifts the middle p/l chart and has a few tent poles for profit. I am still testing it out but it looks similar to a double diagonal P/L chart but mroe stretched across. We will see how my testing and modeling goes. I need to wait until Monday when the OCT expires so I can use the next months in the SPX and certain stocks.

Quote from riskarb:

Can be said of any strategy if your criteria is perfect strike selection. I am referring to the convex PnL indicative of its delta and gamma position. The fact remains that that position earns best at the strikes, which were 30+ handles otm.

Sailing · Oct 19, 2006

Nice to see you treading the waters.....

M~

Quote from optioncoach:

Test Trading the Following Diagonal:

BTO DEC SPX 1415 Call

STO NOV SPX 1395 Call

STO NOV SPX 1325 Put

BTO DEC SPX 1305 Put

Net Debit = $4.55 (Thinkorswim good fill with spread mid at $3.70 and natural ask at $5.50)

Never did the double so I want to test it out with 1 at a cost of $455.00

El OchoCinco · Oct 19, 2006

Debits still go against my religion but if I can cmobine other adjustments it may be worthwhile, especially since it is Vega+....

Quote from Sailing:

Nice to see you treading the waters.....

M~

dagnyt · Oct 19, 2006

Quote from optioncoach:

Debits still go against my religion ...

Debits are not mandatory. Doesn't anyone, besides me, use wider strikes and collect credits for diagonals?

Mark

yip1997 · Oct 19, 2006

I have shorted 3 contracts of rut 760 put, and 8 contracts rut 760 calls from my DDs. Any suggestions to hedge against the set risk?

El OchoCinco · Oct 19, 2006

Wider strikes have their cons in that the long is too far OTM to provide delta help if the short strike is slightly ITM. I was not happy with my 25 point wide call diagonal in how it reacted to the market move higher. The long strike hardly budged initially while the sort strike caused the net cost to jump.

I will experiment with both since credits is more up my alley lol.

Mark, let me know what strikes you are looking at so I can follow along....

I am sure I will try it again under the right circumstances but a debit is fine if the postion has a good chance at profit on a move to the short strike or IV increase.

we will see...

Quote from dagnyt:

Debits are not mandatory. Doesn't anyone, besides me, use wider strikes and collect credits for diagonals?

Mark

yip1997 · Oct 19, 2006

Quote from dagnyt:

Debits are not mandatory. Doesn't anyone, besides me, use wider strikes and collect credits for diagonals?

Mark

Mark,

I do. I usually use both narrow strikes and wide strikes to balance it out to avoid the debits.