SPX Credit Spread Trader

[riskarb]

Quote from optioncoach:

Whoa Risk....

Moreover, why is +gamma a losing strategy if the market stagnates. It all depends on where you select your strikes and how play the strategy. Also, the modelling I have done in selecting the stirkes leads to the most profit IF the market stagnates in a range. I think you are only looking at the GOOG trade ( a fun direction bet) and the one OTM SPX I also tested but I have described how I would use the Cross-Flys much like the diagonal positions.

I like you Phil. Don't take it so personally. It simply seems like "spread of the month". I had some cramps when you started talking about skew and the lack of vega. A double dose of Midol cleared it right up.

To answer your question; long gamma = short theta in a single market. It's a delta play of you're trading out-strikes.

In reference to you slightly backhanded reference to my reliance on greeks. I couldn't tell you my greek position at the moment. I don't run pricing beyond what gives me a raw daily/weekly/yearly IV and a global VaR, which I paid plenty in purchasing. I can make an educated guess, which in all honesty would be pretty accurate, but I don't feel the need. The exotic positions are easy to price, but hard to model; or so the saying goes.

I was the first to give you a high-five on that $6,000 credit you sold with a week to expiration -- so I am really not playing the bad guy here. Congrats on the GOOG and SPX vertical this week.

 

[rallymode]

Quote from optioncoach:

To close both a 380 PUT and 460 Call Calendar now it would result in a net credit of about $14.50.

Phil, i asked about the cost of the 490 call fly and the 410 put fly.

I want to get an idea of where your position would've traded had GOOG opened flat instead of rally with this vol crush.

 

[El OchoCinco]

Well since I used the 460 and 380 strikes why would the 410 and 490 strikes be relevant ??????

Quote from rallymode:

Phil, i asked about the cost of the 490 call fly and the 410 put fly.

I want to get an idea of where your position would've traded had GOOG opened flat instead of rally with this vol crush.

 

[dagnyt]

Quote from jeffm:

How wide are you willing to go on the put side? To collect what size credit?

Up tp 75 points in SPX; 30, sometimes 40 points in RUT, MID

Calls, I can see. Although calls have not worked out this month due to the current market action. But to get a credit on puts, you either have to get closer to the market (a 0.25 delta for instance), or you have to settle for a huge spread (i.e. 80-100 points on SP).

Do you use some kind of timing to enter these trades?

To get started, no. I just open spreads I want to open. I go as far OTM as I can - but I set some limit as to how much credit I need (usualy 2% of the margin requirment). If the near-term options provide no acceptable opportunities, then I start to go out to the 2nd month.

But, once positions are open, I look to add call spreads on rallies and put spreads on dips. Once I've invested all I care to invest, I wait until it's time to close some positons profitably, before entering new positions.

I use a basic stoch to enter my put shorts, so this has been a slow month for me. My stoch has been stuck at the top for weeks now. I need to take my charting software in for a tuneup. I think that stoch must have slipped a gear or something. I slapped it a few times, but the damn thing just won't come down

Hit harder.

This is a dilemma. I chose to sell some additional put spreads as the market moved higher, even though I would have preferred to wait for a decline. Keeping my deltas somewhere near neutral has its benefits. It allowed me to eke out a tiny profit this month.

 

[dagnyt]

Quote from bcreech:

Can someone tell me how diagonals settle? I seem to have forgotten.

I think it goes something like this:

1. The market gaps up just long enuff to get a sweet SET so your short leg will settle ITM

2. Then the SPX drops so the long leg gets cheap for the market to buy back over the weekend.

Right?

You have 2 intelligent choices:

a) Close Thursday afternoon

b) Sell out your longs immediately after the market opens Fri morning. If your broker will not let you make this sale, then get a new broker.

Mark

 

[El OchoCinco]

I do not mind the discussion, it just was not going anywhere constructive lol. +gamma is fine if you use it correctly. It by itself is not a negative.... I did not deride your reliance on the greeks, I was just looking for the big picture . I was getting it for being both + and - gamma so where do I go next? .

Again the GOOG ttrade is not how I intend to use these. I cannot model these yet on SPX until Oct expires as there is no Jan now so we will see.

My tone was friendly even though it is hard to convey here in writing.

Quote from riskarb:

I like you Phil. Don't take it so personally. It simply seems like "spread of the month". I had some cramps when you started talking about skew and the lack of vega. A double dose of Midol cleared it right up.

To answer your question; long gamma = short theta in a single market. It's a delta play of you're trading out-strikes.

In reference to you slightly backhanded reference to my reliance on greeks. I couldn't tell you my greek position at the moment. I don't run pricing beyond what gives me a raw daily/weekly/yearly IV and a global VaR, which I paid plenty in purchasing. I can make an educated guess, which in all honesty would be pretty accurate, but I don't feel the need. The exotic positions are easy to price, but hard to model; or so the saying goes.

I was the first to give you a high-five on that $6,000 credit you sold with a week to expiration -- so I am really not playing the bad guy here. Congrats on the GOOG and SPX vertical this week.

 

[yip1997]

Quote from dagnyt:

You have 2 intelligent choices:

a) Close Thursday afternoon

b) Sell out your longs immediately after the market opens Fri morning. If your broker will not let you make this sale, then get a new broker.

Mark

Mark,

Excellent! You should have told me before yesterday's close. Can't do anything now, and RUT settled at 770.06. The settlement cost for me is around 8K. The price of my long leg is not enough to pay for it.

If I chose to close it yesterday, I would have a credit of $3, or a profit of $2. Now the long leg is around 7, and i basically had a loss of $4.

What did I learn? I am too greedy and fire my broker!

 

[bcreech]

Quote from yip1997:

Mark,

Excellent! You should have told me before yesterday's close. Can't do anything now, and RUT settled at 770.06. The settlement cost for me is around 8K. The price of my long leg is not enough to pay for it.

If I chose to close it yesterday, I would have a credit of $3, or a profit of $2. Now the long leg is around 7, and i basically had a loss of $4.

What did I learn? I am too greedy and fire my broker!

Im wondering what Im going to do next week so I will know not to do it and do the opposite so I might have of chance of not losing my ass like this month. Except thats probably what 'they' are expecting me to do so I should probably go ahead with my current plan, what the hell ever that is.

What does one do when every one is a contrarian?

 

[jeffm]

When you say "2% of margin requirement", are you using the spread width as an estimate of the margin? I.e. if you are looking at a 50 pt SPX spread, you would want a minimum 1pt (2%) credit?

How far OTM would you say your typical put and call are (referring to the short strikes)?

I'm in the same boat this month. I usually wait and put on most of my positions at once. But this month I started scaling into puts starting with the little dip at the first of Oct. All the "buy the dip" folks drove the mkt back up and I only ended up with 1/4 of my usual put size. The profits from puts balanced out the losses from calls and I finished the month with enough profit for a burger and fries.

Quote from dagnyt:
Up tp 75 points in SPX; 30, sometimes 40 points in RUT, MID
I go as far OTM as I can - but I set some limit as to how much credit I need (usualy 2% of the margin requirment).

This is a dilemma. I chose to sell some additional put spreads as the market moved higher, even though I would have preferred to wait for a decline. Keeping my deltas somewhere near neutral has its benefits. It allowed me to eke out a tiny profit this month.

 

[bcreech]

If risk = reward then I must assume by my lack of reward that I have not been taking any risks.

Thats it, Im writing a book. I think Ill call it "Crapital Ideas"