SPX Credit Spread Trader

Market makers? if they expect the market to go up then it would simply go up since they make the market ;).

I took in $3,100 in credit. call are costing $12 and up at this strike.

Quote from ChrisM:

MMs still expect market to go up. How about buying some next exp calls ?
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Quote from optioncoach:

Market makers? if they expect the market to go up then it would simply go up since they make the market ;).

I took in $3,100 in credit. call are costing $12 and up at this strike.
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I didnt mean the same strike.
 
Dagnyt, coach, murray & others,

I'm experimenting with OOM diagonals, CR spreads and backspreads. I'd like to put some thoughts out there for comment.

Diagonals allow you to mitigate some of the downside gamma inherent in credit spreads and to take a position on vega. As others here have pointed out, diagonals can be positive or negative vega depending on spread widths. In order to make the vega bet or lay off some gamma, you have to sacrifice a fair bit of your credit or use very wide strikes, thereby adding to your risk. So far so good.

Putting aside the vega bet for now, and trying to keep things simple, I am finding that a condor with some extra OOM long options take the edge off the gamma ugliness without sacrificing as much of my credit as using a diagonal. Even a ratio of 1.1 or 1.2 favoring the longs has a significant impact. This seems simpler, doesn't it.

Thoughts, comments, flames?

Now allowing for volatility declines to the upside and increases to the downside, you might want to be short vega to the upside and long to the downside (all else equal). How 'bout mixing the approaches - diagonal down, backspreads up? Or a hybrid of backspread/diag to the downside?

I realize I'm not reinventing the wheel here, but I'd appreciate any comments.

PS, Kudos to coach for launching this thread. I've found it invaluable.
 
I'm certainly no expert on Diagonals... just 9 months of trading them and a ton of research.

What essentially you need to make is a decision as to what you think the market may do... or what it may not do... and trade accordingly in the position you take.

As you pointed out... the approach to the strikes, time frame, ratio's... etc... all really are dependent on your market outlook.

Personally, I'm long VEGA short THETA, DELTA and GAMMA nuetral... and today was a wonderful day. But tomorrow may be different.

Are you a strategy trader? A portfolio trader? Risk/Capital trader? Risk/Reward trader?

It's hard to answer questions when the parameters of the strategy are dependent on you market outlook.

Hope this helps,

Murray





Quote from Eric99:

Dagnyt, coach, murray & others,

I'm experimenting with OOM diagonals, CR spreads and backspreads. I'd like to put some thoughts out there for comment.

Diagonals allow you to mitigate some of the downside gamma inherent in credit spreads and to take a position on vega. As others here have pointed out, diagonals can be positive or negative vega depending on spread widths. In order to make the vega bet or lay off some gamma, you have to sacrifice a fair bit of your credit or use very wide strikes, thereby adding to your risk. So far so good.

Putting aside the vega bet for now, and trying to keep things simple, I am finding that a condor with some extra OOM long options take the edge off the gamma ugliness without sacrificing as much of my credit as using a diagonal. Even a ratio of 1.1 or 1.2 favoring the longs has a significant impact. This seems simpler, doesn't it.

Thoughts, comments, flames?

Now allowing for volatility declines to the upside and increases to the downside, you might want to be short vega to the upside and long to the downside (all else equal). How 'bout mixing the approaches - diagonal down, backspreads up? Or a hybrid of backspread/diag to the downside?

I realize I'm not reinventing the wheel here, but I'd appreciate any comments.

PS, Kudos to coach for launching this thread. I've found it invaluable.
More...
 
Any DELTA scalpers in the crowd?

I've been blogging with a few... very interesting market trading approach.... find it very risk managment oriented.... and positive gamma curvatured in nature.

Would appreciate any opinions.

M~
 
Quote from Sailing:

Any DELTA scalpers in the crowd?

I've been blogging with a few... very interesting market trading approach.... find it very risk managment oriented.... and positive gamma curvatured in nature.

Would appreciate any opinions.

M~
More...

murray, what exactly are you interested in?
 
Murray,

You're being humble. I've learned a lot from your posts.

For context, I trade for time decay income without predicting market direction. I am playing with some CTM strategies as well (thanks to insights I've learned from cache, rally and others). But my focus is always on minimizing risk while collecting small amounts of premium over time. Always defined risk. I look at all positions together as a portfolio and take losses and make adjustments accordingly. I don't specifically trade volatility but will modify my approach according to where I think volatility may be.

You and dagnyt (Mark?) seem to trade diags more than others, so I'd value your opinion on this. Would you trade a diag over a credit spread with an extra wing, ie., a backspread. Is 'going diagonal' primarily a gamma-reducing strategy vis-a-vis a credit spread? Thanks for your thoughts!
 
Seems like you're jumping around a lot -- strategy du jour. No offense, but have you perfected any one strategy yet?


Quote from Sailing:

Any DELTA scalpers in the crowd?

I've been blogging with a few... very interesting market trading approach.... find it very risk managment oriented.... and positive gamma curvatured in nature.

Would appreciate any opinions.

M~
More...
 
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