SPX Credit Spread Trader

Coach,

I am sorry to say that but this thread has lost it's raison d'etre . Where are those posts when people ask questions and get answer with no (barking) or being diminished.

Al those guys left have too much pride and ego to really help people; they feel they know everything. That's why I don't post and It's no longer an education thread anymore with all due respect.

Happy Holidays all

Quote from optioncoach:

I Googled some of the things you guys have been discussing and this is the only hit I got:

"Irrelevant to Thread"
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Coach:

Are you still looking at the 1485/1500 bear call? VIX is actually up today. But only $0.50 for a 15 point spread.....

Quote from optioncoach:

I Googled some of the things you guys have been discussing and this is the only hit I got:

"Irrelevant to Thread"
More...
 
Right now looking at the 1490/1495 for JAN at $0.20. I doubt I will get filled but I really do not want to go below 1490 and there is no premium below that level.
 
Coach:

I asked a question earlier regarding the VIX, but I guess it got lost in the diatribes concerning 'Maverick's riddle'.

Here goes:

Did you come to a conclusion on using the VIX as a hedge for black swan events?


Quote from optioncoach:

Right now looking at the 1490/1495 for JAN at $0.20. I doubt I will get filled but I really do not want to go below 1490 and there is no premium below that level.
More...
 
Quote from optioncoach:

Right now looking at the 1490/1495 for JAN at $0.20. I doubt I will get filled but I really do not want to go below 1490 and there is no premium below that level.
More...

Are you not looking at any put spreads? I know CW is we are at a top and early Jan could be down....but the trend is still up. No Bull put spreads? :)
 
Yes i think it does work to an extent since the last time the VIX spiked above 20 I did have some long OTM calls that did double in price. The problem is account size for me. I really do not want to put on the VIX OTM calls I would need month to month as it would be expensive given the size of the positions I am putting on.

A hedge fund friend who is doing similar type SPX spreads in huge numbers takes a percentage each month and buys VIX calls. He buys enough so that a VIX move higher would significantly hedge a huge drop in the SPX. Even though VIX calls are based on the forward implied rate and do not move point for point with actual VIX. If VIX spikes to 30, the VIX calls will move in value since a market maker cannot determine when VIX will pull back or if VIX will move higher. So with VIX at 12, 20.00 strike calls will jump significantly if VIX spikes to 30 although not up to 10 points. With a large number of VIX calls, the profit could very well take care of an unrealized loss in the SPX position allowing you to get out flat or with a small loss compared to what it would be without the calls.

But this person does very wide spreads with 1,000 contracts so he can purchase OTM calls at $0.70 and buy maybe 2500 Calls for $175,000. If those calls jump to $4.00 he makes $825,000. It can cover losses on the SPX to a large extent. he has mid-8 figure fund so he might do 100 point SPX spreads and do 3000 of them. Assume he takes in a credit of $2.50 or $750K. He spends a nice portion of that on the VIX calls. If the market drops and VIX spikes he can survive due to those VIX calls.

I think it is a decent hedge in those situations. For me and my size it is no bigger a hedge than my SPY calls in my opinion.

So the answer is they can work effectively but only in real size in my opinion.

Quote from rdemyan:

Coach:

I asked a question earlier regarding the VIX, but I guess it got lost in the diatribes concerning 'Maverick's riddle'.

Here goes:

Did you come to a conclusion on using the VIX as a hedge for black swan events?
More...
 
Without any market drops I have not had any opportunity for put spreads. VIX spikes usually occur on market drops and will hurt put spreads more than call spreads given the skew and market direction. So I am being a little wary on the puts now given we might have a larger move lower from now until JAN expiration than higher.

Now that the market has turned south a bit I will see what strikes look interesting...




Quote from RichardRimes:

Are you not looking at any put spreads? I know CW is we are at a top and early Jan could be down....but the trend is still up. No Bull put spreads? :)
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Right now have an order for 1335/1340 Put spread at $0.30. Just off the mid so I doubt a fill but gonna leave it all day. I will move it to $0.35 if we keep falling.
 
Quote from optioncoach:

So I am being a little wary on the puts now given we might have a larger move lower from now until JAN expiration than higher.
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Coach,

Why don't you look at call spread if you expect the market going lower?
 
I do not expect the market to go lower. Just that a pullback is likely so I want to be far enough OTM fro my comfort zone. Also the skew makes call spreads to cheap. I would be comfortable at 1490 or so but I am not getting filled on my limit orders and anything above that is almost non-existent.

Quote from yip1997:

Coach,

Why don't you look at call spread if you expect the market going lower?
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