SPX Credit Spread Trader

Quote from dagnyt:

Yip,

If the options you are trading are very active, then you have a real chance to trade at your prices - before much time lapses.

But, you are referring to illiquid options with wide markets. Thus, the problem: it'a very unlikely you will get a fill until the underlying asset has changed price by a sufficient amount that the MMs will want to trade one of your orders. That will leave you legged, with little chance of completeing the spread at a favorable price (unless the underlying reverses direction by a significant amount).

I prefer to enter my spread order, knowing it will not get filled unless the underlying moves. But at least, I'll have my complete spread at a price that was acceptable when I entered the order.

Obviously, it's more efficient to trade more liquid options (but, I don't).

Mark
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Mark,

I understand I will have only one leg in most of the cases. Since I have a "better" price every time I open the position, will it generate a positive expectancy? I actually don't want my offer be filled by MMs. I expect some stupid traders will jump in to buy or sell at market order to give me a positive expectancy. When I see the MMs change their bid and ask, I will change my order accordingly.
 
Quote from TrendSailor:

This is not a fun position to be in. In fact I once got trapped in this with an open order I forgot about that resulted in me going in and out in the same day on a 200 contract SPX short position (at a loss). Nothing like getting a multi-million dollar day-trade call and not having the cash handy to wire in. The broker will let you off 1 of these non-pattern day trades every 90 days before they restrict the trading accounts to uptick rules etc. Anyway, I'd be very careful to make sure that this rule (Exchange Rule 12.10? ) could not be invoked at the subjective whim of the broker when using multiple accounts since it could wipe out even the best risk management and money management plans...
TS
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I just want to clarify that I have done and will do everything legal. Even if I have day trading patterns in all my accounts. So what? I have been daytrading options for a long time.

I want advice from someone who understands the regulation, and not from someone who knows nothing. :mad:

My god! Internet advice is a nightmare sometimes.
 
Quote from yip1997:

Mark,

I understand I will have only one leg in most of the cases. Since I have a "better" price every time I open the position, will it generate a positive expectancy? I actually don't want my offer be filled by MMs. I expect some stupid traders will jump in to buy or sell at market order to give me a positive expectancy. When I see the MMs change their bid and ask, I will change my order accordingly.
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I like your idea, but with those illiquid options, there are no traders to jump in - stupid or otherwise. You will be trading with the MMs (or professional traders at remote locations). That's okay with me. If they want the spread I offer because it gives them some positive edge, that's great. When selling DD, I am not looking for edge per se; I am looking to open the position I want to own.

As far as positive expectancy is concerned, you will not have it. By the time you get your fill, the change in the price of the underlying will negate any such expectancy, if it ever existed. If you change your orders, you may never get filled - and IB charges a small fee to cancel.

Mark
 
Quote from dagnyt:

I like your idea, but with those illiquid options, there are no traders to jump in - stupid or otherwise. You will be trading with the MMs (or professional traders at remote locations). That's okay with me. If they want the spread I offer because it gives them some positive edge, that's great. When selling DD, I am not looking for edge per se; I am looking to open the position I want to own.

As far as positive expectancy is concerned, you will not have it. By the time you get your fill, the change in the price of the underlying will negate any such expectancy, if it ever existed. If you change your orders, you may never get filled - and IB charges a small fee to cancel.

Mark
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he can try to do it as Generic Combo on IB. If ask is 55c( and he want to pay 50 cents) and stock price is 20 , he can select an 1:3 ratio ( if delta is at .30) . The combo price becomes 21.50
 
Quote from dagnyt:

I like your idea, but with those illiquid options, there are no traders to jump in - stupid or otherwise. You will be trading with the MMs (or professional traders at remote locations). That's okay with me. If they want the spread I offer because it gives them some positive edge, that's great. When selling DD, I am not looking for edge per se; I am looking to open the position I want to own.

As far as positive expectancy is concerned, you will not have it. By the time you get your fill, the change in the price of the underlying will negate any such expectancy, if it ever existed. If you change your orders, you may never get filled - and IB charges a small fee to cancel.

Mark
More...

Mark,

I should not say stupid traders. I myself did try to buy illiquid options (one leg) sometimes, and usually had it filled at the ask or close to the ask. The reason was that I was trying to long the curvature some time after I opened my DDs.

I will expect there are some retail traders who do it for some hedging reasons, and so I got this idea. I don't want to get filled when spot moves. Instead I want to get filled when some professional traders are trying to hedge their positions. You can't do it with IB. Most of the brokers including TOS don't charge any cancellation fee.
 
Credit Spread Traders this might be a good week to get in on some options positions for Jan or beyond for higher premium. I have found that a busy economic calendar of events, especially in an options expiration week, is an excellent time to get a rev up in VIX volatility and corresponding premium increase. Take a look at this week's busy action.

By the way, ever wonder why all the significant economic announcements happen prior to market open on the morning before SET & why the SPX synthetic open was deliberately chosen over a close of market settlement? Could it be that the uncertainty was designed into SET to purposely increase the spreads & slippage and speculation volume? Nah, it must be all coincidental... :p

TS
--------------------
WEEKLY ECONOMIC CALENDAR OF EVENTS (IN EXPIRATION WEEK)

Tue. December 12 08:30 Balance of Trade Oct -$63.5B (est)-$64.3 (prior) Moderate (impact)

Tue. December 12 02:15 FOMC Meeting HIGH (impact)

Wed. December 13 08:3 Retail Sales Nov 0.2% (est) -0.4% (prior)
HIGH (impact)

Wed. December 13 08:30 Retail Sales ex-auto Nov 0.3% (est) -0.4% (prior) HIGH (impact)

Wed. December 1310:30 Crude Inventories 12/08 NA -1049K (prior) Moderate (impact)

Thu. December 14 08:30 Jobless Claims (Initial) 12/09 320K (est)
324K (prior) Moderate (impact)

Fri. December 15 08:30 Consumer Price Index (CPI) Nov 0.2% (est) -0.5% (prior) HIGH (impact) [NOTE: likely to influence SET]

Fri. December 15 08:30 Core Consumer Price Index (CPI) Nov 0.2% (est) 0.1% (prior) HIGH (impact) [NOTE: likely to influence SET]

Fri. December 15 08:30 Empire State Index Dec 20.0 (est) 26.7 (prior) Moderate (impact) [NOTE: likely to influence SET]

Fri. December 15 09:15 Capacity Utilization Nov 82.2% (est) 82.2% (prior) Moderate (impact) [NOTE: likely to influence SET]

Fri. December 15 09:15 Industrial Production Nov 0.2% (est) 0.2% (prior) Moderate (impact) [NOTE: likely to influence SET]
 
A 4 point move in the SPX and over a 1pt drop in VIX. Whooooooosh, there goes all the fear again. Not very helpful for my calendars but still up 8% before slippage.
 
optioncoach,

since you have not discussed jan spreads; i have a few thoughts and questions. of course we all would like more volatility and price movement in both directions.

i was studying the es future options. a jan 1320/1300 may yield .6. are return's like that too close and/or not enough of premium? i still am firmly confident of continued success by trading the higher probability spread than those closer that can easily go itm .
 
If it is ES then remember the multiplier is $50 so that is like a $5-point SPX spread for $0.30 which is not bad almost 100 points OTM. I would like to still grab some JAN spreads but the market is just meandering up so low vols and now good entries for puts.

I am also looking at ES but no bites as of yet...

Quote from domestic:

optioncoach,

since you have not discussed jan spreads; i have a few thoughts and questions. of course we all would like more volatility and price movement in both directions.

i was studying the es future options. a jan 1320/1300 may yield .6. are return's like that too close and/or not enough of premium? i still am firmly confident of continued success by trading the higher probability spread than those closer that can easily go itm .
More...
 
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