SPX Credit Spread Trader

[dagnyt]

Quote from ryank:

Mark,

The talking heads have their gums flapping about a coming increase in volatility. With the double diagonals I do that could be good or bad, my timing would have to be good. Assuming we do start getting more volatility, how do you see it affecting the DD that you do?

PS- good book by the way.

Hi Ryan,

My DD spreads tend to be long only a small amount of vega, and although I would have to settle for somewhat smaller credits, I don't believe an IV increase will make much difference when I open posiitons.

However, as time passes, and if the shorts do not become very near the money, then the positions become longer in vega. Thus, I'd say this is mildly beneficial to my situation. Bottom line: spreads which are already winners become even more so, but those which are not working won't be helped much.

Those who do spreads for a debit own more vega and can really make a nice profit if IV spikes.

Thanks for book comments.

Mark

 

[Zegras]

Well, it looks like my condor should come in okay this month. I am thinking about just taking it off for $.20 and not risk what happens during options expiration. My credit was $1.20 so I would still be thrilled with the monthly gain. So far, Crowder has been right on since he began making condor trades. Although, I am certain that anyone who has implemented this wonderful strategy in their portfolio over the past three or four months have been extremely happy with the results.

 

[TrendSailor]

Quote from Zegras:

Well, it looks like my condor should come in okay this month. I am thinking about just taking it off for $.20 and not risk what happens during options expiration. My credit was $1.20 so I would still be thrilled with the monthly gain. So far, Crowder has been right on since he began making condor trades. Although, I am certain that anyone who has implemented this wonderful strategy in their portfolio over the past three or four months have been extremely happy with the results.

Indeed - congrats. I am looking very good also with mine. My front month positions for Feb expire next week and the only serious threat I have had this month remains to the still bullishly strong upside pressure. The bull has been my nemesis and only serious loss this year in Oct's wild run. I can't believe people still do not respect this bull. But I am personally hoping that the negative sentiment tossed on the back of the bull with yesterday's bad lender news (e.g. New and HBC) slows the bull down slightly. I only have 22 points to the upside of safety through expiration and I need it to pause here for a few more days. With my primary condor pegged in at SPX PUT 1370/1360 & CALL 1470/1480 and SPX now hesitating here at around 1448 I am currently inclined to hold through expiration. I'll continue to monitor as earnings season tapers off. But it is a bit worrisom that the resistance at 1450 was trampled on and going north we are in uncharted territory through 1500.

I expect a heavy rotation from value stocks to a narrow field of smaller cap but high quality growth going forward. That should cool the steepiness of SPX500 up-rise going forward. RUT could explode up though as puts unwind next week. The thing that is hard to project on the SPX though is when we get a moderate correction and re-validation to the downside. There are a LOT of cowards and Chicken-Little's still sitting in cash but now wishing they had a chance to dance & come in to the party and join this awesome bull run. My bet is that the bull gives them a chance to come in soon. Barring war drums and negative geopolitical events, VIX under 10 should be the trigger.

It's a great time to be long in high quality growth stocks. My freshened "growth" portfolio put on in Nov is beating the hell out of anything that the mutual fund "pros" are putting up these days. These winning condors just make it ever so sweeter with regular monthly spending income. For me, it could only get better if Canada were now to reverse itself on its idiotic new Income Trust tax policy. That would bring in another 20-30% returns on top of the 14% average dividend and fireside sale (25% off book value) I picked up when the bureaucrats massacred that asset class back around Halloween with an insane tax policy change. Its kinda like a reverse long call option where I get paid a hefty dividend premium to wait for the idiots to realize they screwed up and reverse the decision. But in this case its a 4 year leap before taxes hit and the underlying asset is oil and gas and we know that must go up. Man oh man - this is like candy-land...

Cheers & Good-luck,
TS

 

[dagnyt]

Quote from TrendSailor:

There are a LOT of cowards and Chicken-Little's still sitting in cash but now wishing they had a chance to dance & come in to the party and join this awesome bull run.... Man oh man - this is like candy-land...

TS

Some may be in cash; that is their perogative.

But someone who gloats, someone who thinks he's in 'candyland,' has no real conception of the market and its workings.

And more to the point, your post is 100% out of line on this message board.

Mark

 

[arizonadreamer]

Quote from dagnyt:

Some may be in cash; that is their perogative.

But someone who gloats, someone who thinks he's in 'candyland,' has no real conception of the market and its workings.

And more to the point, your post is 100% out of line on this message board.

Mark

"candyland?"

And what if you are a diabetic? LOL

And now for a post that is roughly 3% out of line on this message board:

I have been having a terrible time splitting the bid/ask on the SPX options. I do spreads on the small-priced and large-priced contracts.

Even on attempting to leg in, I run into problems. For example, if there is a contract 16 x 17.6 (1.80 seems to be the spread between the b/a at this price) and I want to buy that contract, I've gone all the way up to the low 17s and still not been filled! :eek:

On the flip side of the coin, every once in a while, I'll see someone else with a bid - - - say 17.3 (a couple of contracts) x 17.6 - - - and I'll sell at the bid (or if the situation is 16 x 16.2 where the MM offer is at 17.6 I'll buy at the ask of 16.2) to "get a good price" LOL.

Anyone else having troubles? Anyone else try to pick off these "bargains?"

AZD

 

[ryank]

Wow, 70% of my profit wiped out in an hour. See what I get for going out for a long lunch. Trying to lock in some gain on my tent polls. Would like to then have the market move back up and recover some.

 

[yip1997]

Can anyone explain negative gamma scalping? An example will be helpful.

 

[arizonadreamer]

Quote from ryank:

Wow, 70% of my profit wiped out in an hour. See what I get for going out for a long lunch. Trying to lock in some gain on my tent polls. Would like to then have the market move back up and recover some.

Never eat lunch - not without a computer in that tent of yours.

AZD

 

[yip1997]

Quote from ryank:

Wow, 70% of my profit wiped out in an hour. See what I get for going out for a long lunch. Trying to lock in some gain on my tent polls. Would like to then have the market move back up and recover some.

If the market moves higher, IV will drop. You then make money on delta but lose on IV.

You need to have a good balance of delta, theta and vega management for trading diagonals.

 

[TrendSailor]

Quote from dagnyt:

Some may be in cash; that is their perogative.

But someone who gloats, someone who thinks he's in 'candyland,' has no real conception of the market and its workings.

And more to the point, your post is 100% out of line on this message board.

Mark

You call it gloating I call it having fun & sharing in the joy with another trader; and that is my prerogative not yours.

So, Mark, when are you ever going to learn that no one here appointed you Custos Morum? I know you want to feel relevant and important but this is not your forum. We have had this discussion before virtually every time you open your mouth on anything I post. If pattern follows you will now log on to 2 or 3 of your many other supporting aliases to re-butt this.

You really take yourself much too seriously if you think your incessant mother henish admonishments to anyone who posts here without first kissing your derriere are going to garner you new worshipers and clients. yeah yeah I know you have years of floor-trading experience and have written books etc.

But everyone with any brain figured out long ago that you are what we call a "vanity author" - a legend in his own mind. And a vanity author is somone who's ego is so huge that to feel relevant they are willing to pay vanity publishers to market their books & hire faux critiques to make glowing fake book review comments. Have you ever looked at what real people are saying about your books online Mark? I was actually embarrassed for you about what they were saying when I looked.

Since I am also a published author in a different area I feel obligated to let you in on a little community secret. Didn't anyone tell you that real authors never first pay a publisher 100% up front to get published with a minimum order size? Nope, real authors who have a real chance of actually making sales and profits for the publisher will be sponsored by them for a minor proofing fee and commission agreement. The publisher shares a large part of the risk for authors who can make them money. "Vanity Publishers" on the other hand make money by victimizing egos; e.g. wannabe's who are so blinded by hubris that they really think they are above average. Such publishers make the author pay for their ego and vanity up front in cash - and its a terrific business for them. They know that this gullible class of author is so starved for recognition and esteem that they will give away their books for free to family and friend or offer them up as cheap marketing throws to promote online sales gimmicks (e.g. "trading systems"). Nope, real publishers have real standards and real reputations to protect. That keeps the fluff out of the bookstores, the fiction in the paperback isles and the egos and vanity gathering dust in boxes upon boxes of unpurchased and unread books on the shelf at the homes of the vain and the gullible.

But you have a good day,
TS