SPX Credit Spread Trader

Quote from dagnyt:

1) It was a statement not a question

2) Your mind is already made up, so no answer satisfies you.

3) I already answered in my previous reply.

The bottom line is that when the markets are moving rapidly, the MMs do not stand around and study the quotes, looking for two lots. They are busy trading. Those well positioned are busy making lots of money, those badly placed are scrambling to survive.

By the way, if a 2-lot is on the screen and a big customer comes to trade at that price, the MMs re not required to fill the order, nor do they 'lose lots of money'. A few of them sell small numbers to satisfy a 10- or 20-lot (or even a 100-lot is nothing split 20 ways) minimum and then the quotes are changed,.

I don't know where you get your ideas about what goes on in the pits, but it seems to me you get it from message boards and the opinions of other ill-informed people. At least that's how it appears.

Mark
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You are full of it , you know that?

I care less what goes on in the pits. I care what goes on my computer screen. When those Aug 1400 puts trade at 19.00 x 23. 50 I feel sick. There is no reason for that wide gap between them except its human greed and monoply. Its an abusive business practice in the absence of viable competition. Its a deep moat CBOE has erected around its Castle.

I get my experience from my trading. No one taught me that and I am willing to share my SECRETS without money and gain.

I have busted those wide bids and ask on 8/16/2007 with that 12 contract Aug 1400/1385 spread and got out. I hope anyone reading it should do the same.
 
Quote from day7793:


My post is about just one thing :

How to trade SPX and not get robbed.
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One way to 'not get robbed' is to make intelligent trades.

I agree that SPX MMs are not worth dealing with and I trade different products.

But if trading SPX, why deal with wide markets in $20 options when you can deal with $2 optiosn and narrower markets?

If you trade equivalent positions instead of the positions you seek to trade, you an often get better fills. And in SPX, as you know, the public in there also. they make some pretty bad trades. If you had bid $1 or $2 or ?? for those calls, it's possible you would have bought them.

That's one way to avoid getting robbed - try to make better trades.

Mark
 
Quote from dagnyt:

1) It was a statement not a question

2) Your mind is already made up, so no answer satisfies you.

3) I already answered in my previous reply.

The bottom line is that when the markets are moving rapidly, the MMs do not stand around and study the quotes, looking for two lots. They are busy trading. Those well positioned are busy making lots of money, those badly placed are scrambling to survive.

By the way, if a 2-lot is on the screen and a big customer comes to trade at that price, the MMs re not required to fill the order, nor do they 'lose lots of money'. A few of them sell small numbers to satisfy a 10- or 20-lot (or even a 100-lot is nothing split 20 ways) minimum and then the quotes are changed,.

I don't know where you get your ideas about what goes on in the pits, but it seems to me you get it from message boards and the opinions of other ill-informed people. At least that's how it appears.

Mark
More...


You are full of it , you know that?

I care less what goes on in the pits. I care what goes on my computer screen. When those Aug 1400 puts trade at 19.00 x 23. 50 I feel sick. There is no reason for that wide gap between them except its human greed and monoply. Its an abusive business practice in the absence of viable competition. Its a deep moat CBOE has erected around its Castle.

I get my experience from my trading. No one taught me that and I am willing to share my SECRETS without money and gain. I have busted those wide bids and ask on 8/16/2007 with that 12 contract Aug 1400/1385 spread and got out. I hope anyone reading it should do the same.
 
Quote from dagnyt:

One way to 'not get robbed' is to make intelligent trades.

I agree that SPX MMs are not worth dealing with and I trade different products.

But if trading SPX, why deal with wide markets in $20 options when you can deal with $2 optiosn and narrower markets?

If you trade equivalent positions instead of the positions you seek to trade, you an often get better fills. And in SPX, as you know, the public in there also. they make some pretty bad trades. If you had bid $1 or $2 or ?? for those calls, it's possible you would have bought them.

That's one way to avoid getting robbed - try to make better trades.

Mark
More...


The SPX bids and asks have a tendency to widen on expiration day! Its because traders trying to get in and out have nowhere to go its simple human greed at work.

I have minimized my use of SPX product. .

RUT, NDX, SPY, IWM are all better products to trade.
 
Quote from day7793:

The SPX bids and asks have a tendency to widen on expiration day! Its because traders trying to get in and out have nowhere to go its simple human greed at work.
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...greed is good, greed works...
 
Mark,

Thanks for your quick response and good advice.

The reason I prefer 10 contracts of 20-point spreads is to limit the risk of SPX SET. Assume in September, my short put leg is 15 point away from Thursday SPX closing price before expiration, and I know there are no big economic news and earning announcements for big companies. I decide to hold my position. The next day, SPX SET price is one point lower than my short put, and then I’ll only lose $1,000. However, if I have 20 contracts of 10-point spreads, then I will lose $2,000. I think in this situation, 10 contrasts of 20-point spreads are less risky.

Some one told me, if you decide to close your credit spreads to take a loss as the Index is moving toward to your short leg, the cost might be less for 20 contrasts of 10-point, and it is easier to close. Is it true?

I sold 10 Aug SPX 1400/1380 put @2.00 when S&P 500 was at 1460. Seeing the markets were going down big, I decided to hedge my position instead of closing the spreads. The Index bounced back higher; I entered the position to buy 4 Aug SPX 1460/1435 put @7.50. I think I did right to protect my position, but it was a mistake that I thought it was deep in the money and I did not close the spreads to take the big profit.

The mistake is always the best teacher. Going forward, I’ll either to close all SPX spreads I have Thursday afternoon before expiration, or to buy some deep out the money calls/puts to protect my positions as Mark advises. Also, I might try to use RUT or stock GOOG to do some credit spreads.
 
Quote from day7793:

Please read my post on " How to pull the rug on SPX traders" at the end of your journal. You know this already, but I posted it anyhow.

I was caught on expiration day 8/16/2007 with 12 contracts August 1400/1385 put spread. Hammered my way out. They won't let you out. I am disgusted the way SPX market makers operate.
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I dont think i want to spend all expiratin day hitting em with ones and two to close out 500 spreads :D.

Beside if I have to bail on a bad spread I just get as best I can knowing SPX comes with it the risk of wide b/a spreads. NDx has fewer strike choices but much tigher spreads.

I have not given up entirely on SPX but SPX v. NDX has its trade offs or pros and cons and just depends on what position I am looking for. I do think NDX is better for FLYs.
 
Quote from optioncoach:

I dont think i want to spend all expiratin day hitting em with ones and two to close out 500 spreads :D.

Beside if I have to bail on a bad spread I just get as best I can knowing SPX comes with it the risk of wide b/a spreads. NDx has fewer strike choices but much tigher spreads.

I have not given up entirely on SPX but SPX v. NDX has its trade offs or pros and cons and just depends on what position I am looking for. I do think NDX is better for FLYs.
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Once again, thanks for responding to my post Optioncoach. Its a pleasure to be able t post in your journal as it will help many SPX traders. I wish I had joined here before, I see quite a number of people trading SPX.

This technique won't work with 500 contract spreads. You would need two helpers hitting those bids and ask all day. It only works for smaller number of contracts upto 20 contract spreads.

I like RUT and NDX, a bit more volatile than SPX , but great fills. RUT can be a pain sometime though. They have better spread executions.

I have used the same technique there as well and it cuts like a
knife on butter. RUT is pretty good otherwise.
 
Quote from zhangw:



The reason I prefer 10 contracts of 20-point spreads is to limit the risk of SPX SET.

I understand that rationale. but, the best (by far) SET risk eliminator is to be 100% out by Thurs close. Sure, you give up some premium, but over the long-term, it's just not worth the risk.

Besides, starting the next month early nets you better time premium, so you quickly get part of the near-term premium returned.


Some one told me...the cost might be less for 20 contrasts of 10-point, and it is easier to close. Is it true?

The 20-pointer does cost less than twice the 10-pointer (because the bottom strikes are further OTM. But, you also collected less than double when opening.


I sold 10 Aug SPX 1400/1380 put @2.00 ... I entered the position to buy 4 Aug SPX 1460/1435 put @7.50. I think I did right to protect my position, but it was a mistake that I thought it was deep in the money and I did not close the spreads to take the big profit.

a) It's cheaper to buy protection at same time you sell your spread, not when in trouble.

b) NEVER cover the troubled side of the 4-way without simultaneously closing the winning side. It's similar to an IC. If you cover the puts for a loss, it's foolish to leave the FOTM call side just sitting there to demolish you again later. Same principle. Risk management.

Going forward, I’ll either to close all SPX spreads I have Thursday afternoon before expiration or to buy some deep out the money calls/puts to protect my positions...
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Covering is best, IMHO.

Buying those call spreads, is not 'protection'. It's just another way to close out your long DITM put spread - if you choose the same strike prices. But any strike prices do buy protection.

Better luck next time.

Mark
 
I trade the ES options. I can offset them with ES futures at expiry if the option prices are unreasonable. Aug expiry worked fine for me.

What are the advantages of the SPX options? (not the spreads- looking at the Sep 1200 puts for example, the B/Ask is 2.25/2.40 on ES and 2.00/3.00 on SPX).
 
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