SPX Credit Spread Trader

Quote from optioncoach:

The quick and dirty answer is that the index options are skewed such that OTM calls have lower IV than the ATM calls and OTM puts have lower IV than the ATM puts.

For puts it is a result of market crashes in the past. Large institutions and traders purchase OTM puts as insurance on large stock portfolios and market makers know that these OTM puts always have buying demand due to fear of a crash which could happen at anytime. This buying bias pushes prices up and skews the vols in the OTM puts.

Large players also sell covered calls against their stock portfolios for added income and slight hegde protection. This selling bias pushes OTM call prices down and skews vols lower.

This is the vanilla reason and these skews will always be there and are not really telling us anything but reflect a current behaviour in the market. if the OTM calls moved up in price, then more people would sell them against their stock portfolios, pushing them backlower. If OTM puts got relatively cheaper, then more players would buy up the cheap OTM insurance, pushing the prices back higher. So the market keeps the skew in place.
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Thank you. The call IVs for Nov are extremely low - at 8.x %. Absolutely no premiums here, I guess. So aren't call sellers at a big disadvantage - given the recent move of the markets ie not being compensated enough for the risk taken?
 
I'm looking at the VIX as well as a possible indicator.

What indicators do you typically use for the SPX?

Quote from optioncoach:

MA crossovers lag market action but for a conservative approach to entry and exit in a position they can be used with some success with other indicators. Try a 20/40 EMA and backtrest cross overs. Add a 10day EMA for a 3rd line and use Bollinger bands as well.

Nothing fool proof or 100% but if you use 3 MA cross overs and BBs you might find some patterns/signals you like.
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For credit spreads on the SPX I just look at the big picture for support and resistance and trends.

For day trading I do use MAs fro support and resistance and trends as well, but I also use candlesticks and bollinger bands.

I used to use stochs, MACD and CCI but I found it was just confirming what I was already seeing in the charts so might as well lessen the eye strain and stick with the charts.

Oscillators are fine but overbought can stay overbought and oversold can stay oversold so just be careful....

Quote from rdemyan:

I'm looking at the VIX as well as a possible indicator.

What indicators do you typically use for the SPX?
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Quote from LeonPhelps:

and VBI Nov went down 3.80. What does it all mean?!:confused:
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Not a lot IMO. Excluding weekend effect, VIX was not much different from Friday most of the day. Little bit of fear due to blip on Sunday + lower open perhaps. FOMC policy statement et al tomorrow. At the close, demand for options -> higher VIX.

This thread just gets better with age :D
 
Quote from momoneythansens:

Not a lot IMO. Excluding weekend effect, VIX was not much different from Friday most of the day. Little bit of fear due to blip on Sunday + lower open perhaps. FOMC policy statement et al tomorrow. At the close, demand for options -> higher VIX.

This thread just gets better with age :D
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what is the today's real VIX value in your opinion ? Could it be 9.99 ?
:)
 
Quote from IV_Trader:

what is the today's real VIX value in your opinion ? Could it be 9.99 ?
:)
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Actually, I was thinking at least 8...but we all know you have your minions in your dungeon working on manipulating the market so that you don't have to leave ET LOL :)
 
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