Technical breakout? Bullish engulfing candlestick pattern?
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SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Technical breakout? Bullish engulfing candlestick pattern?
Hi guys,
I had a call spread out for SPX Oct. 1370/1380 calls and for some reason instead of expiring worthless...I had to buy back the SPX 1370 calls for 1.12? Any ideas why this should have happened. I assumed they were worthless because the SPX range for Friday was 1362-1368 and it opened at 1366 so tell me how 1370's had value? Thanks...and no this is not my first credit spread.
I had a call spread out for SPX Oct. 1370/1380 calls and for some reason instead of expiring worthless...I had to buy back the SPX 1370 calls for 1.12? Any ideas why this should have happened. I assumed they were worthless because the SPX range for Friday was 1362-1368 and it opened at 1366 so tell me how 1370's had value? Thanks...and no this is not my first credit spread.
Quote from susanelfs:
Hi guys,
I had a call spread out for SPX Oct. 1370/1380 calls and for some reason instead of expiring worthless...I had to buy back the SPX 1370 calls for 1.12? Any ideas why this should have happened. I assumed they were worthless because the SPX range for Friday was 1362-1368 and it opened at 1366 so tell me how 1370's had value? Thanks...and no this is not my first credit spread.
Didn't Coach go over SET with you? Coach, where the hell are you? Your students need a refresher course in SET!
Quote from susanelfs:
Fill me Maverick with what you know about SET. I thought the "set" price was based on Friday's am open...but obviously I'm wrong. So fill me in.
No, that is incorrect. SET is a special opening rotation procedure where a hypothetical index price is created from the opening print of all 500 companies in the SP 500. I say hypothetical because the price does not exist except on paper. In real life, all 500 stocks don't open at the same time. Therefore, they are creating a hypothetical value of what the index would be if all 500 stocks did open at the same time. In many cases, the SET price can be much higher or lower then actual prices that traded that day. Back in Nov of last year, SET on the SP 500 was 10 handles higher then the actual high that was traded that day. You should never hold a short option into SET if you are within 10 to 15 handles of the short strike. That is pure gambling.
Quote from ryank:
It is great to see the two different styles of diagonals being done, yours and Murray's. Your style seems to be a little less sensitive to VEGA (but still plays a good part) than Murray's because you have a greater distance between your shorts and longs. The trade-offs are that your loss becomes greater faster as you go past your long (not that you would let it get that far) and the margin required is greater.
The important point is that there are many possible strategies and investors/traders should be able to find one that fits their comfort zone.
I agree that I have larger potential losses, but my goal is to accept those inevitable losses quickly, before they become too large, and move on. So far - and the past two months have been troublesome - I'm satisfied with the results (I've only been doing diagonals exclusively for the past 4 months).
...do you feel the diagonals are a better strategy for you going forward based on your recent experience?
An unqualified, YES.
Quick question on your Dec/Jan diagonals, are you holding these until closer to Dec expiration (i.e. not closing at Nov expiration)? I would assume this is the case because at Nov expiration your profit window would be much narrower than Dec.
Yes, the holding period is based on the expiration date of the nearer-term option, and not on how long the position is in my portfolio.
Thanks for adding another twist to our recent diagonal discussions and positions, it has all been very fun to watch.
There's lots for people to share on this quality message board.
Quote from Maverick74:
No, that is incorrect. SET is a special opening rotation procedure where a hypothetical index price is created from the opening print of all 500 companies in the SP 500. I say hypothetical because the price does not exist except on paper. In real life, all 500 stocks don't open at the same time. Therefore, they are creating a hypothetical value of what the index would be if all 500 stocks did open at the same time. In many cases, the SET price can be much higher or lower then actual prices that traded that day. Back in Nov of last year, SET on the SP 500 was 10 handles higher then the actual high that was traded that day. You should never hold a short option into SET if you are within 10 to 15 handles of the short strike. That is pure gambling.
Mav,
Thanks as usual your one of the few in ET that know what the heck thier doing.