SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Mark,
I cannot agree more with what the others say. I have heard a few say it looks complicated, but within 15 minutes almost everyone can use the software easily. After the inital look everything is pretty intuitive and very easy to use. TOS also upgrades frequesntly adding new features and continuing to make the software easy to use.
I cannot agree more with what the others say. I have heard a few say it looks complicated, but within 15 minutes almost everyone can use the software easily. After the inital look everything is pretty intuitive and very easy to use. TOS also upgrades frequesntly adding new features and continuing to make the software easy to use.
Well, I decided to go out on my own this month (although I did replicate a service I will not mentions position). I have a 140 point range and my sohrt strikes are 1460-1320. After the huge run up this week and over 4 weeks left until expiration I am somewhat uncomfortable with my current postion as it is only 25 points from the short call strike. What are my options (no pun intended) at this point? Take the hit and move on. Roll up both sides and take a potential smaller loss but still remain in a position with over 4 weeks left. Any suggestions would be great. Thanks. Zeg
Zegras,
Please take this in a positive way but it is best to have a plan for how to handle moves like this before putting a position on. These kinds of moves happen on a fairly regular basis and if you don't have a stategy you are comfortable with, you will get hurt.
You can hedge by buying some calls or rolling the strikes further out. There is no one right answer. It depends on your level of exposure and risk tolerance.
Kapil
You have many choices. No one is 'best' Depends on what you want to do.
If you have an opinion on market direction, you can go with that. But, unless your track record is outstanding, I strongly suggest not doing this.
It's easy to say that you should have a plan in place, but, to me that's oversimplification. I'll agree that you want to have a general idea of what you want to do, but you cannot possibly know, in advance just which trades to make.
1) One thing you can do when the market runs higher is to get yourself some positive gamma. You can buy some calls or you can do some positive gamma spreads. Don't compound the problem by making these positions delta short. Make them delta neutral or delta positive - as long as they are gamma positive.
With IV shrinking, you must decide of you want to buy extra vega (June options) or not. Buying extra May options is sort of a compromise on VEGA.
2) You can cover some put spreads and roll them higher. That will give you a bit of cash, but it provides no real protection against a substantial move up. And, you will regret this choice if the market heads sharply lower.
3) You can simply give up some of the credit you received by covering some call speads or buying some calls.
4) You are not required to trade SPX, if something else is more suitable.
Mark
Just some chices. There are others.
I finally get to agree with Mark; at least on this part.
I think those that like to say "have a plan" for every option trading contingency are living in a bit of a fantasy world. There is a dinstinct line between the theoretical world and the real-world.
It is hard to get fills at reasonable prices in a fast moving market that materializes out of no where. Sometimes its impossible to get anything close to the trading volume one needs (e.g. 100+ contracts) to "get out" or adjust. If anyone doubts this put yourself in the position of the other side of the trade. Who in their right mind would have taken your request to sell you long call protection today as the market shot straight up (irrationally and counter intuitively to the news) over 24 points (1.71%) after the FED meeting around 1:15 ? It took over 2.5 hours for that transient to normalize and a lot of that was forced by the closing bell. I bet not too many orders got filled on the rocket ride up until it found a flat spot for a 10 or so minutes.
And what plan in the real-world is going to help a trader who just was unlucky to have finally got a large block of SPX CALL credit spreads to fill 15 minutes before the explosion up? How is that trader going to get back out of his shorts without getting a huge pattern day trader margin call to the tune of hundreds of thousands of dollars (or millions) for going in and out of his 100 shorts in the same day? Yeah, sure there is the option of overlaying directional debit spreads or pushing into the next month(s) before one understands the physchology of "why" it moved up so violently. But that could get you in double trouble if the adjustments were not executed perfectly under the stress of trading or if the market resets itself on a misfire of economic news the next trading day.
Some of the people in this forum have incredible technical knowledge and give some outstanding theoretical trading advise. But a few of the same sound as if they have never traded more than a few dozen contracts at a time or must think that the average trader has a multi-million dollar buying power margin account. Some of us do but I bet a lot don't.
TS
Mark...my experience may be a bit different as I am electronically challenged. I found TOS a bit complicated to use at first. I spent many hours with their webairs or whatever for learning and months...about 6...before I began to be comfortable.
By far they have been the most helpful and instructive brokers I have ever dealth with and I wouldn't change for free commissions! Once you get through the learning curve the pay back is 100 fold.
oh and Zegras I think your fine...you just have to sweat it out....