SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
To collect dividends, without taking stock downside risk.
Basically you are describing a "buy and hold" strategy. Purchase a stock with upside potential and wait for it to increase in value.
This is called a strategy for an investor.
You might want to look at some of the webinars at www.moneyshow.com and click on the investor tab at the top.
Best of luck.
CDOWIS
thanks for your answer. I guess traders dont have the investor mindset.
Currently RUT May 790 put is quoted at 0.4 x 0.45, but the theta shows 0.49. It is impossible for the time premium to more than 0.45 in one day.
Does it mean the option pricing model (theta calculation etc) is not applicable at the expiration week?
If the greeks are not applicable, what is the best way to hedge our position in the expiration week?
Does it mean the option pricing model (theta calculation etc) is not applicable at the expiration week?
If the greeks are not applicable, what is the best way to hedge our position in the expiration week?
Here is an observation that I wanted to get some opinions on.....
Looking at the 20 day and 10 day EMA's for the past couple months:
Its pretty clear the SPX is bouncing off the 10 day EMA and going higher so the trade seems to be buy debit call spreads at the bounce or open credit puts.
But also looking at the 20 day and 10 day for the past year, it seems like whenever the SPX gets to about 30 points over the 20 day EMA or 20 points over the 10 day EMA the market tends to pullback a bit or either it sits and consolidates for a few days while the 10 day average moves up to within the 15 point range.
What would be a good trade for this situation? For instance looking at a current 10 day EMA of 1502, the upside move would be 1522 before consolidation for a few days or a slight pullback. Would it be better to try a debit put spread once SPX gets to about 1522 (today....assuming it happened) or a CTM or FOTM Call credit spread. The danger with the put position seems to be that if it does consolidate for a few days and then moves higher, you lose on time premium and the upside. The call position, would lose on the upmove but if you get consolidation you may be able to squeak out a small profit on time decay...and of course a good profit on a pull back.
So just wanted to get opinons on how people would trade this situation and how far apart strikes you would use. Again this is for a pretty short term trade time (1-3 days).
Looking at the 20 day and 10 day EMA's for the past couple months:
Its pretty clear the SPX is bouncing off the 10 day EMA and going higher so the trade seems to be buy debit call spreads at the bounce or open credit puts.
But also looking at the 20 day and 10 day for the past year, it seems like whenever the SPX gets to about 30 points over the 20 day EMA or 20 points over the 10 day EMA the market tends to pullback a bit or either it sits and consolidates for a few days while the 10 day average moves up to within the 15 point range.
What would be a good trade for this situation? For instance looking at a current 10 day EMA of 1502, the upside move would be 1522 before consolidation for a few days or a slight pullback. Would it be better to try a debit put spread once SPX gets to about 1522 (today....assuming it happened) or a CTM or FOTM Call credit spread. The danger with the put position seems to be that if it does consolidate for a few days and then moves higher, you lose on time premium and the upside. The call position, would lose on the upmove but if you get consolidation you may be able to squeak out a small profit on time decay...and of course a good profit on a pull back.
So just wanted to get opinons on how people would trade this situation and how far apart strikes you would use. Again this is for a pretty short term trade time (1-3 days).
With the time value premium and wide bid/ask spreads in SPX options, I would suggest you run the same analysis on ES (S&P futures) and see if you get the same moves. If so then you will get more movement and profit potential on the futures tracking the S&P then the options on the SPX.
If futures are too risky or unfamiliar for you then you can stick with options. But the debit or credit spreads will not have deltas even close to .5 so if yo load up on a debit spread you need a significant move to overcome the delta and wide b/a spread before a profit is made.
If futures are too risky or unfamiliar for you then you can stick with options. But the debit or credit spreads will not have deltas even close to .5 so if yo load up on a debit spread you need a significant move to overcome the delta and wide b/a spread before a profit is made.