SPX Credit Spread Trader

Quote from piccon:


Hey, I am open to discussion and criticism

Ok. Discussion, even though you are not a 'great discussion guy.'


I have 25 770/760/790/800 condor @7.20. The max I can lose is 2.80.

While that statement is obviously true, you have already earned a good deal of money on this spread, as you have pointed out more than once. Thus, you can lose the amount you already earned, in addition to that 2.80 - if you make the invesment desision to continue to hold.

Please understand: I am not saying it is either right or wrong to hold, just that you can lose a lot more by holding than you are willing to admit.


If my 770/760 was to be in great danger today I could increase the size of my 790/800 call to compensate...

That is a very poor idea. First it exposes you to more unside risk than I am sure you want. Second, and more importantly the additional cash you collect is hardly sufficient compenstaion for the downside risk you are trying to manage.

Selling calls to reduce put risk is something that is not in the repetroire of successful risk managers. Sure, seling both sides of the iron condor is a good idea, but not when the purpose is to reduce risk of a very dangerous position.


and later even if it goes even lower, I could go down to 770/780 call... That's would make me break even or lose only 1$ or less total on the trade. That's the worse that can happen to this trade.

Not exactly true. You would not feel you lost only $1 if this were to happen. That money you already made, that money you have mentioned here, that would also disappear. How would that feel?

I know that my 740/730 is much safer than 770/760 but in term of what I can lose in case something bad happens like Katrina, 911, I am a little bit worried about 740/730.

I'm asking you to pelase rethink this. Your skill comes from knowing when to enter/exit positions. I believe strongly your risk management skills have not yet developed sufficiently to see the error you are making. It is clear that the 770/760 risk is greater than the 74-/730 risk. Just because that specific spread would show a smaller loss on your final statistics sheet, it doesn't mean that this position is less of a risk problem for you. The money you can collect and put in the bank (by closing) is your money. Please do not put it at risk just because you had a large credit when opening the trade. That large credit (earned by your good timing) should not make you fail to see the risk you incur by holding the position.

I learned a lot from Coach and a lot of positive people on this board. I don't take everything somebody gives me, I analyze it and make my own decision.

That's very intelligent. Please consider doing that with these suggestions.
More...

Best regards,
Mark
 
Mark,

A good analogy might be if someone bought Enron for $2, rode it to $75 and stated that he has very little risk in that position because of his low basis.

Kapil
 
Quote from dagnyt:

I believe strongly your risk management skills have not yet developed sufficiently to see the error you are making. It is clear that the 770/760 risk is greater than the 74-/730 risk.

Mark, can you elaborate on how the cheap gamma(rut 740/730 short vertical) is less of a risk than the fatter gamma(770/760 short vertical)?? I hope you are not going where i think you are going. =)
More...
 
I woudl not speak for Mark since he is more than qualified to do that but let me interject what I think is being said. The higher strike put spread has a greater liklihood of having hte short strike touched versus the further OTM spread so its has a higher risk of turning into a loss.

Even though the further OTM spread has a greater absolute value loss potential, the closer to the money spread has a greater chance of acutally losing money.

If that is not what Mark meant, then as Latke says on Taxi...

NEVER MIND!
 
Quote from piccon:

I hope my explanation helps. Hey, I am open to discussion and criticism (positive one).

I learned a lot from Coach and a lot of positive people on this board. I don't take everything somebody gives me, I analyze it and make my own decision.
More...

piccon,

Thanks for your explanation. I just closed jan 730/720 at a debit of 0.15. Though it has a 98% chance of expiring worthless, I chose to cover it today to release margin for new opportunities.
 
Quote from rallymode:[/i]
Mark, can you elaborate on how the cheap gamma(rut 740/730 short vertical) is less of a risk than the fatter gamma(770/760 short vertical)?? I hope you are not going where i think you are going. )
More...

Hi,

Before I could respond, Coach has stated it very well for me. Fat gamma/chealp gamma is not the issue here.

The CTM spread will become almost a total loss before the 740/730 spread is theatened.

That's all I meant to say. The CTM spread will lose big time (from this point forward) before the other spread loses.

Mark
 
Quote from kapil:

Mark,

A good analogy might be if someone bought Enron for $2, rode it to $75 and stated that he has very little risk in that position because of his low basis.

Kapil
More...

Very good analogy.
 
Quote from yip1997:



I just closed jan 730/720 at a debit of 0.15. Though it has a 98% chance of expiring worthless, I chose to cover it today to release margin for new opportunities.
More...

Yip,

That's how I trade also. I'd rather try to make that 15 cents (and more) elsewhere.

Mark
 
I am lighting up as well. I close my 810/820@0.10 debit. I am watching RUT so I can close 740/730.

I want to close the condor 770/760/790/800 but I am witing for RUT to test 781 either tomorrow or Friday. I hope We have flat days like this until then.

Nasdaq has been driving this market since 2007. I am watching pretty closely as I enter my positions.

Yes I am willing to close this week as I am up 25% so far this month.

Quote from yip1997:

piccon,

Thanks for your explanation. I just closed jan 730/720 at a debit of 0.15. Though it has a 98% chance of expiring worthless, I chose to cover it today to release margin for new opportunities.
More...
 
Great blog!!!
can anyone recommend a good broker with little commissions in order to have a profit in these spx credit spreads?

thanks
fay
 
You must log in or register to reply here.
Back
Top