SPX Credit Spread Trader

Sorry for the absence of late.... but I see you guys have things well under control here.

I do hope someone edits this journal into two distinct chapters.... chapter one "Worthwhile", chapter two "Worthless". Might even be worth publishing.

There you go coach.... Book #2. "From Credit Spreads to Flying Time Spreads.... what you really don't want to know and were still afraid to lurk"

Welcome T.S.
 
Have to pretty much agree with Rally on this one. When I look at the months where I adjusted, I have generally lost more than if I had just closed the position and moved on. Most months I do just close the position and move on. Unfortunately for me, October was not one of those months.

Having been on the thread for over a year I do have to say that Coach seems to be able to adjust his positions when necessary and profit from said adjustments (except this month).

Quote from rallymode:

No one is picking on you. It is my impression that people are trying to help you since you seem to not have enough clarity on the risk management part of this approach.

As far as adjustments, there are none. That's the easy answer. Take the loss and move on. First, you cannot hedge the cheap gamma you sold in any effective way no matter what you do, much less once your PnL is running negative and second, even if you found a "proper" hedge it will have nothing to do with any positive expectancy or improved probability. Perhaps, if you continue reading the thread from where you left off, you will realize this for yourself. Not to be rude but this is getting silly.

Just my 2 cents.
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Quote from Sailing:

Mark,

Curious if you have done much analysis on buying Put Calendars slightly OTM on a scaleable over time entry approach to your Double Diagonals.

I say this because I'm wondering if this would help negate the gamma run-up at the short ends of the diagonal on a over-time basis.

Any thoughts?

M~
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Hi Murray,

I've actually considered bringing this up for discussion. But, no, I have not done a thorough analysis.

I believe this approach would be better for your DD than for mine. Reasons:

1) Paying debits for the DD, plus buying a tent pole calendar means that all three positions lose money when the market moves past one of your diagonal strikes. I thought OTM calendars would provide another tent pole where it is needed most.

2) Collecting credits means I have no soft spot in the middle. I win unless one of the DD strikes is breached. Yes, an OTM calendar would help, but I think just owning extra calls and puts would help even more. I could reinvest a portion of the premium I collect to purchase such protection, but I've decided NOT to spend the cash - primarily because it's a wasting asset.

Another point: I find that I am very close to VEGA neutral when opening my positions (as opposed to your being very long VEGA). Obviously, the longer I can hold the position, the longer my VEGA becomes. My DDs are truly THETA plays for the first 2/3 of their lifetime and become VEGA plays near the end - the time period during which I consider closing and taking profits.

Mark
 
Mark and Murray,

I like to contribute some of my studies on diagonals. If you have a wider strike difference, sometimes it might have a negative vega. The strategy will be totally different.

Since I play both narrow and wide strike difference, I can adjust my vega play to fit market conditions. For example, when IV is high, I like to open diagonals with negative vega. When IV is low, I like to open diagonals with positive vega like Murray.

I am pretty new to diagonal, so don't take my words, and do your own analysis.

Diagonal is a monster that can change its behavior because of the strike selection. Instead of looking diagonal as a strategy, it is better to look at the greeks and trade according to the greeks.

Just my 2 cents.
 
WoW! I'm looking for exactly the opposite... I must have stumbled into the Bizarro world.

Quote from Cache Landing:

.... Personally I am looking at 2 more days of churn, and then a 10+ point jump on friday.
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Quote from andysmith:

WoW! I'm looking for exactly the opposite... I must have stumbled into the Bizarro world.
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We are still stuck firmly in this 2 month uptrend. Until we break down I don't have any hope for a correction. Everytime we look like we might break trough support, the buyers come back quick.
 
Quote from Cache Landing:

We are still stuck firmly in this 2 month uptrend. Until we break down I don't have any hope for a correction. Every time we look like we might break trough support, the buyers come back quick.
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Just my two cents - but I think you are 100% on correct. The single thing that concerns me about the IC play with NOV exp that I am playing is bucking this Bull stampede to the upside. The market has been like on a perfect track upward for about 3 months with amazing strength. I am trying like mad to bias my credit spreads to favor the downside by buying on the put side of the IC anytime we get an intraday down trend. But the downside action don't last too long nor drive hard enough to get the premium I'd like to pick up. I have no idea where all this pent up energy is coming from to the upside and can only imagine its foreign money flowing in or a herd mentality coming in late with a large amount of side lined cash not wanting to miss out? Some of the conspiracists even suggest pre-election manipulation; but I don't buy that. Maybe its all the people in real estate paying off their home equity ATM machines by taking profits in real estate and re-migrating cash back into the market. That is pretty much what I did about a year ago just as real-estate started to fall off its peak.

At some point there MUST be a correction for the upside action to be able to sustain itself. But the million dollar question is WHEN? I do not see it happening this month nor in Dec. But this is based more on personal seasonality hunch than it is anything technical. The market does not like to buck the good cheer of the holidays...

TS
 
Quote from optioncoach:

Taking a page from the CTM foks....

My technicals show we could fall to around 1365 which is a moving average area of support or a little more towards 1360 if today;s down day holds. So I sold an ITM call spread to profit the next week or two if we do hit 1360:

STO 10 1370/1365 Call Spreads @ $3.10

Credit = $3,100
Risk = $2,900
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Coach,

1370-1365=5
3.1+2.9=6

is this calculation error or Im missing sth here ?
 
The market went up when it was seasonally disposed to go down in SEPT and OCT. I wonder what it will do after the elections in NOV and DEC when it is seasonally disposed to go up....

As for my close to the money SPX spread, I am not looking for a breakdown of the trend, just a normal short retracement which looked less likely after yesterday's reversal higher.... :(


Quote from TrendSailor:

Just my two cents - but I think you are 100% on correct. The single thing that concerns me about the IC play with NOV exp that I am playing is bucking this Bull stampede to the upside. The market has been like on a perfect track upward for about 3 months with amazing strength. I am trying like mad to bias my credit spreads to favor the downside by buying on the put side of the IC anytime we get an intraday down trend. But the downside action don't last too long nor drive hard enough to get the premium I'd like to pick up. I have no idea where all this pent up energy is coming from to the upside and can only imagine its foreign money flowing in or a herd mentality coming in late with a large amount of side lined cash not wanting to miss out? Some of the conspiracists even suggest pre-election manipulation; but I don't buy that. Maybe its all the people in real estate paying off their home equity ATM machines by taking profits in real estate and re-migrating cash back into the market. That is pretty much what I did about a year ago just as real-estate started to fall off its peak.

At some point there MUST be a correction for the upside action to be able to sustain itself. But the million dollar question is WHEN? I do not see it happening this month nor in Dec. But this is based more on personal seasonality hunch than it is anything technical. The market does not like to buck the good cheer of the holidays...

TS
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