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SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Quote from piccon:
When you accept 0.50 to 0.90c for RUT spread, it's normal that you panic 17 points away.
The 770/760 spread in question gives me a total of 7.30 for a condor.
I don't accept less than 1.60 on any trade; I already know how much I am willing to lose when I put the trade; So I don't panic even when my short is violated.
The big difference is CTM, ITM, FOTM. I don't go FOTM unless I want some extra money and I close them as soon as a trend is broken.
For example I got 1.10 for 40 RUT Jan 740/730; Once the MA(50) is broken, I am willing to close it.
I hope you understand why I don't panic.
Did you close your 770/760 and 740/730 spread? Since your condor has a good r/r, will you hold it till expiration (the normal trade management for CTM spread, imo)? I don't want any argument, but just want to learn how you manage your trades.
Quote from yip1997:
Mark,
I don't quite understand your opinion here. If he got 7.30 with a risk of 10. It is a good risk reward ratio, even his short has a higher chance of expiring atm. This is the characteristics of CTM vertical. Am I right?
Not in my opinion.
If the spread can be closed right now for a buck, what difference does it make whether he received a credit of $2, $4, or $6 or any other amount? In your scenario, he can book a profit of $6.30. That is his money, not house money.
The decision is based on "do I keep this spread open, trying to make all or part of that remaining $1, or is the risk/reward currently unfavorable? Do I want my money invested in this position, another position, or sitting on the sidelines?
Mark
Quote from dagnyt:
Not in my opinion.
If the spread can be closed right now for a buck, what difference does it make whether he received a credit of $2, $4, or $6 or any other amount? In your scenario, he can book a profit of $6.30. That is his money, not house money.
The decision is based on "do I keep this spread open, trying to make all or part of that remaining $1, or is the risk/reward currently unfavorable? Do I want my money invested in this position, another position, or sitting on the sidelines?
Mark
Mark,
Thanks for your clarification. Let me see if I understand.
If he opened the condor with 7.3 credit, at the time when you posted your message, holding his position (instead of booking his profit) is more daring than opening a Feb 730/720 position.
IOW, comparing the two possible actions,
1. Close his condor and open Feb 730/720
2. hold his condor.
you think 1 is a better action than 2, right?
Quote from yip1997:
Mark,
...comparing the two possible actions,
1. Close his condor and open Feb 730/720
2. hold his condor.
you think 1 is a better action than 2, right?
Yes. But that's for me, my risk profile, and my comfort zone.
I would never say that doing what I prefer is the 'correct' action. That's a decision that each investor makes for himself.
I prefer to close positions when the profit potential becomes small - and to simultaneously open a new position with greater profit potential. That style does not suit everyone. Plenty of people like to hold thru expiration, collecting every last penny from the current position.
Mark
Closer RUT gets to 770 more money I make. As Nasdaq was getting overbought yesterday, I opened
25 IWM 77@ 0.60 I also added 10 790/800 RUT when RUT was 791 @ 4.80
This morning I opened 25 IWM 76/75 debit spread @0.30
With all these, I don't need to close my RUT 740/730.
I also had 20 810/820 @ 1.70 now is worth 0.60
I opened my position based on OB/OS signals and I get enough premium such that when RUT approaches my Short, I can still make money with other Wings Spreads.
Next week will be crucial; I am looking for some bounce or consolidation next week and I may start closing Tuesday after Marting Lutehr Holiday with two days left to expiration.
But As I told you, I don't open Spread for next month until the Expiration week. In fact, I like to open my CTM or ITM on Wednesday before expiration if Technical Analysis gives me go signal
I hope this helps
25 IWM 77@ 0.60 I also added 10 790/800 RUT when RUT was 791 @ 4.80
This morning I opened 25 IWM 76/75 debit spread @0.30
With all these, I don't need to close my RUT 740/730.
I also had 20 810/820 @ 1.70 now is worth 0.60
I opened my position based on OB/OS signals and I get enough premium such that when RUT approaches my Short, I can still make money with other Wings Spreads.
Next week will be crucial; I am looking for some bounce or consolidation next week and I may start closing Tuesday after Marting Lutehr Holiday with two days left to expiration.
But As I told you, I don't open Spread for next month until the Expiration week. In fact, I like to open my CTM or ITM on Wednesday before expiration if Technical Analysis gives me go signal
I hope this helps
Quote from yip1997:
Did you close your 770/760 and 740/730 spread? Since your condor has a good r/r, will you hold it till expiration (the normal trade management for CTM spread, imo)? I don't want any argument, but just want to learn how you manage your trades.
Quote from piccon:
Closer RUT gets to 770 more money I make. As Nasdaq was getting overbought yesterday, I opened
25 IWM 77@ 0.60 I also added 10 790/800 RUT when RUT was 791 @ 4.80
This morning I opened 25 IWM 76/75 debit spread @0.30
With all these, I don't need to close my RUT 740/730.
I also had 20 810/820 @ 1.70 now is worth 0.60
I opened my position based on OB/OS signals and I get enough premium such that when RUT approaches my Short, I can still make money with other Wings Spreads.
Next week will be crucial; I am looking for some bounce or consolidation next week and I may start closing Tuesday after Marting Lutehr Holiday with two days left to expiration.
But As I told you, I don't open Spread for next month until the Expiration week. In fact, I like to open my CTM or ITM on Wednesday before expiration if Technical Analysis gives me go signal
I hope this helps
piccon,
thanks for the illustration. I now understand your trading style a lot better. Do you reserve some buying power in order to open other wings in the future?
Quote from dagnyt:
I prefer to close positions when the profit potential becomes small - and to simultaneously open a new position with greater profit potential. That style does not suit everyone. Plenty of people like to hold thru expiration, collecting every last penny from the current position.
Mark
Mark,
I understand your management style. You try to fully utilize your margin. That makes sense to me.
I always have some money left either to close or open CTM or FOTM wings when TA allows. I have two accounts TOS and OX so I can for example do 770/760 and then later decide to do 760/750.
If you manage this well , I don't see too much downside because you know already how much you want to lose and you can always open other spreads to balance in case on is going against you.
The most important factor in this business is "TIME". You want time to go fast and your Index to consolidate in a channel as much as possible. If it breaks the channel, you have to open some debit spreads to counter the effect.
RUT is the best index I have found to trade Vertical and make money fast and get out with 17.5% IV, it goes up and down and is easier to get filled with
If you manage this well , I don't see too much downside because you know already how much you want to lose and you can always open other spreads to balance in case on is going against you.
The most important factor in this business is "TIME". You want time to go fast and your Index to consolidate in a channel as much as possible. If it breaks the channel, you have to open some debit spreads to counter the effect.
RUT is the best index I have found to trade Vertical and make money fast and get out with 17.5% IV, it goes up and down and is easier to get filled with
Quote from yip1997:
piccon,
thanks for the illustration. I now understand your trading style a lot better. Do you reserve some buying power in order to open other wings in the future?
Quote from piccon:
RUT is the best index I have found to trade Vertical and make money fast and get out with 17.5% IV, it goes up and down and is easier to get filled with
I agree. I started trading RUT vertical and diagonals since July, and now devote all my buying power in RUT.
I don't see any good reason to diversify to other indices. Having one instrument make position management a lot easier.