SPX Credit Spread Trader

[yip1997]

Quote from dagnyt:

I closed a bunch of diagonal put spreads (my call positions are all ok, because I own some extra calls) for two reasons: One the profit was good enough to tempt me. But, more importantly, the market was running away from the strikes.

I open these spread for a credit. As time passes and if the market does not run towards the strikes (too quickly) then the spread revalues and enables me to close for another cash credit. That's the good news.

But, that cash credit can dwindle when the market rallies because the position's delta moves from positive to negative and because IV decreases. One way to protect the available credit is to grab it before it disappears. That's what I do.

Mark

I use a different approach. When delta moves from positive to negative, I will add another put diagonal to adjust the delta to my comfort zone (not neural). Since I open the new diagonal with a better IV (smaller IV), I have a chance of getting a bigger profit.

I didn't want to close all my diagonals because it meant i didn't get my target profit (because closing at smaller IV = smaller profit).

I don't know which is a better approach. It is interesting to compare these two approaches. Any comments on the pros and cons?

 

[Sailing]

Mark,

You mention diversification, yet there is a strong correlation between the indexes you mentioned in which you currently trade.

Have you considered trading non-correlated indexes? on a weighted/equal basis?

Reason I ask, is as part of our discussion for our next investment club meeting, our topic will be diversification! I personally look at diversification as non-correlation, not in quanities of positions or different strategies, although structuring strategies differently can generate the same objective.... ie, MAV.

Mav... on the otherhand, would not diversify, but would stresses positive curvature to eliminate risk... thus eliminating the need for diversification or non-correlation. What I like most about having curvature is the not having to diversify for risk protection.

Murray

Quote from dagnyt:

 

[dagnyt]

Quote from Sailing:

Mark,

You mention diversification, yet there is a strong correlation between the indexes you mentioned in which you currently trade...

Have you considered trading non-correlated indexes? on a weighted/equal basis?

Murray

I do have positions in SOX, OSX and MVR, but they are not large enough for diversification help.

I would rather trade indexes where I can more easily get into and out of positions. I have an extremely difficult time with SPX, so don't do much there.

Bottom line: I chose to trade whre I can, rather than attempt to diversify.

Mark

 

[dagnyt]

Quote from yip1997:

I use a different approach. When delta moves from positive to negative, I will add another put diagonal to adjust the delta to my comfort zone (not neural). Since I open the new diagonal with a better IV (smaller IV), I have a chance of getting a bigger profit.

I didn't want to close all my diagonals because it meant i didn't get my target profit (because closing at smaller IV = smaller profit).

I don't know which is a better approach. It is interesting to compare these two approaches. Any comments on the pros and cons?

I don't know which is a better approach either.

It never bothers me to get out before my target profit is reached because I find that I can receive a significantly larger credit by moving out one month. That provides an excellent path towards making more than my target profit in the new spreads.

One other point: I am more comfortable being short call spreads than put spreads, especially at this level in the market, so I am not interested in adding additional put spreads to my portfolio. Just a personal preference.

Mark

 

[andysmith]

Coach -- are you really brave enough to grab puts spreads on a large spike down while the market appears to be topping?

Quote from optioncoach:

Pretty crappy environment for SPX spreads in my opinion. With VIX so low, OTM calls are trading near 8% vols at the strikes I would be comfortable with and thus no premium and we have not had any significant dips for me to grab put at strikes I feel comfortable with. So for right now I am on the sidelines with respect to SPX spreads. January only has another week or so left before time left to expiration shrinks those premiums away as well lol...

 

[El OchoCinco]

Well I dont mean a market crash spike, just a down day pull back. We are still in a bullish trend but I need a down day to get a good put spread fill. We have had one significant down day in the past 5 weeks or so, so never had a good oppurtunity to get in....

Quote from andysmith:

Coach -- are you really brave enough to grab puts spreads on a large spike down?

 

[MechTrade]

Quote from optioncoach:

Well I dont mean a market crash spike, just a down day pull back. We are still in a bullish trend but I need a down day to get a good put spread fill. We have had one significant down day in the past 5 weeks or so, so never had a good oppurtunity to get in....

You take your opportunities when they come... Got a small 1340/1330 Put bull spread @ .60 on 11/27 w 18 days to expire. Would have wanted a larger position, but was hoping for a little more follow thru to the down side for even more premium or even lower put spread levels.

My TA indicated two support levels at that time: 1387 trandline support combined with 1360 Pullback support. Plenty of room for exiting without too much damage to the trade (which was relatively small).

 

[elovemer]

off-topic ? --
yesterday i tried to close out my 40 RUT 732/720 put vertical spreads for .05

ToS filled me for 1 contract and charged me $25.90 for it.

anyone else getting partial fills and non-partial commission charges with ToS in closing RUT VERTICAL SPREADS ?

wondering if .... Interactive Brokers has the same problem ?
----

....on-topic ... looking to get an end of month RUT call vertical spread but ... alas... no premium.

 

[El OchoCinco]

Call in ToS and explained what happened, they will do right by you. They might even give you that one contract free since they know you will still need to close out the other 39. Never hurts to ask

Quote from elovemer:

off-topic ? --
yesterday i tried to close out my 40 RUT 732/720 put vertical spreads for .05

ToS filled me for 1 contract and charged me $25.90 for it.

anyone else getting partial fills and non-partial commission charges with ToS in closing RUT VERTICAL SPREADS ?

wondering if .... Interactive Brokers has the same problem ?
----

....on-topic ... looking to get an end of month RUT call vertical spread but ... alas... no premium.

 

[dagnyt]

Quote from elovemer:

wondering if .... Interactive Brokers has the same problem ?

IB would have charged you a total of $2.00 for that trade.

Mark