SPX Credit Spread Trader

domestic · Feb 28, 2007

Quote from Cache Landing:

I've been bearish for a while now, so I cleaned up today. Would've done better if this had happened last month as I was much more aggressively bearish last month. Wait long enough and I'm bound to be right I guess.

Just remember, money in the market is not lost, just transferred. I happened to be on the receiving end today but it took balls of steel to short that market for the last month.

because i care...and i need to make sure i do not get complacent .
yes it takes big balls and good assessments to have been short.

i was also massively short calls too. i had no short puts, just refused to sell puts in the highs. i for one plan on not putting on some careless trades after looking so good now; i implore others who were short calls or the market to tread carefully.

anyway...cache and others, great job!

dagnyt · Feb 28, 2007

Quote from Eric99:

Mark,

How did you diagonals do today? I remember you put them on with less vega than does Murray. Did you do anything different in your adjustments than you usually do? And with the high vol, are holding off on new positions until vols fall?

Eric,

1) The first 300 point drop was good for me. My puts were very far OTM and my remaining calls were much CTM. Was considerably ahead.

2) I sold more put spreads during the day

3) The subsequent decline wiped out those gains and I lost a little on the day However, I now have a few put positions that are ATM and dangerous.

4) I closed many call spreads yesterday, and want to add new ones, but I probably have to focus on not getting hammered on put spreads. New positions should probably be verticals, since they ae better to open when IV is high. But, I really prefer diagonals, so do not know which I will choose.

5) I have not adjusted any put positions yet. I doubt that I will be able to do so and will selectively take the loss and close some, as it beocmes necessary.

6) My positive vega disappears on a decline. I am essentially vega neutral here, so an my initial positive vega is no longer going to help.

7) Big disappointment regarding curvature is that I find it easy to own extra calls, but was never willing to pay the cost of owning extra puts.

Thanks for asking.

Mark

TrendSailor · Feb 28, 2007

Sorry - mech. Got a bit carried way on trying to figure out what was behind the market moves.

General Question for anyone.

With volatility and premium being so high does anyone have an opinion on the merits of playing a strangle or collar here on SPX. If volatility is really as high VIX suggests might it be a warranted trade?

TS

dagnyt · Feb 28, 2007

Quote from TrendSailor:

With volatility and premium being so high does anyone have an opinion on the merits of playing a strangle or collar here on SPX. If volatility is really as high VIX suggests might it be a warranted trade?

TS

Regarding collars: We all already play them. Selling a put spread is the synthetic equivalent of a collar.

Regarding strangles: Risk seems out of line with reward. But, as I am sure you know, selling a strangle and buying a further OTM strangle for protection, is an iron condor.

High IV is an appropriate time to open vertical spreads. Credits are greater than in a low IV environment.

Mark

arizonadreamer · Feb 28, 2007

These huge bid/ask spreads are killers!

Sure, if you are entering a position, you can be patient.

But with high IV and huge spreads, it makes exiting existing positions somewhat difficult.

Observation: if you are patient, you can trade in between these spreads and do some scalping. Not a recommendation, just an observation. LOL

AZD

dagnyt · Feb 28, 2007

Quote from arizonadreamer:

Observation: if you are patient, you can trade in between these spreads and do some scalping. Not a recommendation, just an observation. LOL

AZD

True, but some of us (that's me) trade very options with almost zero public paper.

Mark

arizonadreamer · Feb 28, 2007

Quote from dagnyt:

True, but some of us (that's me) trade very options with almost zero public paper.

Mark

Mark,

Would you please elaborate on this statement? Almost zero public paper?

AZD

dagnyt · Feb 28, 2007

Quote from arizonadreamer:

Mark,

Would you please elaborate on this statement? Almost zero public paper?

AZD

That means these options have very low volume. No individual investors (the public) trading.

"Paper" refers to orders that are printed on paper and carried into the trading pits by runners and handed to floor brokers for execution.

No public paper means that if I want to trade these specific options, I trade with the MMs. Thus, cannot take legs.

Mark

arizonadreamer · Feb 28, 2007

Quote from dagnyt:

That means these options have very low volume. No individual investors (the public) trading.

"Paper" refers to orders that are printed on paper and carried into the trading pits by runners and handed to floor brokers for execution.

No public paper means that if I want to trade these specific options, I trade with the MMs. Thus, cannot take legs.

Mark

Thanks.

I still cannot believe these quotes. Huge spreads. For example, the June 1325 puts are going for 11 x 16 right now!

A five point spread. Come on MMs, is that really necessary?

AZD

kalikahuna · Feb 28, 2007

Quote from arizonadreamer:

These huge bid/ask spreads are killers!

Sure, if you are entering a position, you can be patient.

But with high IV and huge spreads, it makes exiting existing positions somewhat difficult.

Observation: if you are patient, you can trade in between these spreads and do some scalping. Not a recommendation, just an observation. LOL

AZD

yeah, impossible to get a realistic exit position. But i feel like someone made huge bags of money from selling off the VIX from yesterday to now

I'm tentatively starting to relax the sphincter...but I dont want to spook the market...btw, i put on a RUT 830/850 spread