SPX Credit Spread Trader

I would really, really, recommend you don't do very long time spreads on the SPX. Last Nov when the vix was lower than it is today I did a put calendar (Nov/Mar)and it hasn't paid. Perhaps just bad timing on my part. I won't do it again.

The folks doing diagonals do them only one month out with very good reason...simply those are the best odds. I think the far out month (3-4 months) puts/calls on the SPX are just flat out overpriced. Remember time=synthetic volatility thus farther out in time you go the higher the vol's and the higher the price you have to pay. Tred lightly.
 
yeah...I hear ya the dangers. Any put calendar from Sept to now would have been destroyed (especially if opened @ debit). I guess this strategy with the long month really banks on a huge drop by May or so.

In another scenario, imagine if Nov. and Dec. were relatively flat or slightly up and in Jan, the market dropped out from underneath...you could have potentially made a killing. I guess these trades a very direction dependent which is a drawback...but how long can this rally last right?...meh, I'm just bored right now with ICs and verts and low vol.
 
I certainly hear THAT :p I'm looking at opening an Apr/May put diagonal but not until very close to March exp or just after. My diagonal would have made money had I not tried to leg into it...
 
Quote from RichardRimes:



The folks doing diagonals do them only one month out with very good reason...simply those are the best odds.
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Speaking for myself, I prefer doing diagonals with 2 months to go. But this past week, I opened several Jun/May diagonals.

I don't agree that near-term provides the best odds - unless your plan is to hold thru expiration - and I almost never do that.

Mark
 
Quote from dagnyt:

Speaking for myself, I prefer doing diagonals with 2 months to go. But this past week, I opened several Jun/May diagonals.

I don't agree that near-term provides the best odds - unless your plan is to hold thru expiration - and I almost never do that.

Mark
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Perhaps not "best" odds...but may be "truer" odds? IOW no one can predict the future but certainly the nearer future is more predictable than farther away.

Are you doing RUT or SPX May/Jun diagonals? Are they put, call or both? thanks..d

also...just in looking at the volume not much except in the quarters, halfs and wholes...problematic in the SPX past one or two months. I think when volume increases it may get easier to do.

hummm..interesting 10K contracts at Jun 1350! others not even close..wonder if they were bot or sold
 
Quote from RichardRimes:



hummm..interesting 10K contracts at Jun 1350! others not even close..wonder if they were bot or sold
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Correct me if im wrong but both bought and sold. One party would have bought 10k and another would have sold :D
 
duh...while your wide awake I'm half asleep :p I should have said "traded"...however the volume is still interesting...someone out there may really have wanted to buy or sell and the MM had to make a market. Back to the problem of volume, where there is little volume it does get more difficult and out two months and even 6 weeks there are often strikes you want that arn't there. I hope with the new changes in April we will see volume pick up on the SPX.
 
Quote from RichardRimes:

Perhaps not "best" odds...but may be "truer" odds? IOW no one can predict the future but certainly the nearer future is more predictable than farther away.

Are you doing RUT or SPX May/Jun diagonals? Are they put, call or both? thanks..d
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1) If I plan to close a diagonal spread after holding for 4 or 5 weeks, I don't believe it matters whether I own a position in Apr/Mar or May/Apr (or even Jun/May). I am not trying to 'predict' anything. Merely attempting to collect theta for one month.

2) I would do 100% RUT if I could get my orders filled. I do as much RUT as I can. Then I fill in with whatever looks attrractive at the point in time that I want to add posiitons: SPX, NDX, SOX, SML, RUI, XEO.

3) Both puts and calls

Mark
 
Thanks Mark, appreciate the reply, I did for the first time last week pick up the phone and called the CBOE and asked for two strikes which were added within the hour. Major personal breakthrough :( ) A lady from the CBOE actually called me back! A word of caution for others though, the strikes were not added to my trading platform until the next day.
 
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