SPX Credit Spread Trader

LOL..... well I hope to keep it going. In a week or so I may add to my JUNE positions and even add some JULY positions once I get below 40 days to expiration just after Memorial Day.

WIth the SPX at 1189 or so my current risk now is to the upside given my short strike of 1230. 1200 would be a short-term resistance given some past history so I do not feel the need to add any partial hedges yet but if the SPX moves over 1200 strongly leading into Memorial Day I may have to consider a partial hedge and will post it.

FOr now I expect a slow week before and after the holiday which bodes well for time decay for me.

Regards,

Phil

Quote from nlslax:

Great thread. Got yelled at twice this morning for not getting to the lawn cuz I wanted to finish reading. Like a good book you can't put down.:D

Thanks in advance for the ongoing input.

Steve
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I have tested using them but will not be working them in for real until June. Based on my observations they have similar liquidity as SPX options with the wide b/a spreads and deep OTM puts still have significant premiums. I have also looked into them as hedging vehicles and I like what I see so far.

As soon as I work them into my trading I will be posting those trades real time too.

ANother upday in SPX but will not be surprised to see the SPX end up sideways for the week leading into the long weekend.
Tried twice to pick up more OTM put spreads but just was not getting filled on wide b/a spreads using 1130 and lower strikes. WIll try again tomorrow.

July premiums look very nice and by next week I will be opening my July positions and will post them as I open them.

Phil


Quote from EliteThink:

phil, I have yet to use emini options, can you please comment on your experience with them? Thanks.
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TOok advantage of the slight dip today to grab some more premium for JUNE.

Today at 2:00 PM I opened the following posiiton:

Sold 90 JUNE 1110/1120 Bull Put Spreads @ $0.30

Credit = $2700
Margin = $90,000
ROM = 3%

With about 23 days to expiration I figured I would grab some more deep OTM PUT spreads. The 1120 Puts have a current delta of .07 which also corresponds to a 93% chance of expiring worthless. Even though the credit is small, the distance out of the money given the time to expiration makes it worth it.

So this is added to my other OTM bull put and OTM bear call spread in the above posts. I needed a slight down day to grab the credit. This is a good way to steal some additional nickles and dimes as expiration approaches.

The down day also buys me some time for my 1230/1245 bear call spread as I do not want the S&P to get over 1200 too soon.

Phil
 
Some strength in the SPX today and the past week so I decided to add a cheap partial hedge to the upside in case I need to roll out of my call spread on the SPX. SPX at 1196.

REMINDER OF CURRENT POSITIONS:

65 JUNE SPX 1110/1125 Bull Put Spreads @ $0.75

Credit = $4,875
Margin Risk = $97,500
ROM = 5%

55 JUN 1230/1245 Bear Call Spreads @ $0.80.

Credit = $4,400
Margin Risk = $82,500
ROM = 5.33%

Sold 90 JUNE 1110/1120 Bull Put Spreads @ $0.30

Credit = $2700
Margin = $90,000
ROM = 3%

Totals

CREDIT = $11,975
MARGIN = $187,500 (Iron Condor only counts margin on bigger side so $97,500 + $90,000)
ROM = 6.39%

HEDGE ADDED (remember partial hedge not total hedge)

Bought 85 June SPY $123 Calls @ $0.15
Cost of $1,275.

NEW NET CREDIT WHEN HEDGE FACTORED IN:

Net Credit: $10, 700
New ROM: 5.71%

Hedges are partial insurance so it reduces our profit. If the SPX moves towards 1230, the long calls will increase in value and provide some profit to offset any initial losses in the 1230/1245 Bear Call Spread I currently own so I can better decide what to do with the position. If the index never makes it to 1230, then I let the credit spreads and long calls expire worthless and still have a net excellent return for the month of June.

Regards,

Phil
 
Regarding your hedge, the only reason you did not simply buy back the short 1230 call in your short bear call spread is due to the wide SPX options spreads, yes? You opted for the equivalent of 8.5 SPX calls in the SPY options, instead?
 
Thanks for the question.

No the main reason is that I still feel the SPX will stay under 1230 by expiration but I forsee potential upside moves if it breaks through 1200. Any good news after that and 1230 is a real possibility. If it does my long calls will also increase in value, especially if it makes a strong move over the next two weeks and this additional income will give me a cushion to absorb some losses on the short 1230 call and make an adjustment if I need too.

For example, let's say SPX is at 1215 by the end of next week. My 1230 Calls could be worth $0.60 (hypothetically). That results in a profit of $3,825. That amount with my additional profit from the put side will eat into any paper loss on the call side and give me a chance to make an adjustment if I need too. If I at that point close the Call side for a small loss, I can still have a nice profit on the Put side and additional income from my long calls.

I am just trying to make some money from the potential increased movement to the upside so I have more of a cushion to make a necessary adjustment. I want as many choices and potentially more income to help with my risk management.

Phil


Quote from ig0r:

Regarding your hedge, the only reason you did not simply buy back the short 1230 call in your short bear call spread is due to the wide SPX options spreads, yes? You opted for the equivalent of 9 SPX calls in the SPY options, instead?
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With Jluy expiration now miving under 45 days to expiration and some slow weeks ahead with the start of summer I opened a new position for JULY to keep my money moving.

New July Positoin:

SPX @ 1194.25

Sold 60 JULY SPX 1110/1125 Put Spreads @ $.80

Net Credit = $4,800
Margin = $90,000
ROM = 5.33%

Should be closing some June positions in the next few weeks which will open more margin for some more July positions. Need to keep the positions rolling from month to month to keep the returns and stay ahead of potential losses.

So far June is looking very good given the index bounce off of resistance at 1200. My put spreads are deep deep OTM and shrinking slowly as time decay kicks in. Will most likely take about half of them off to lock in some profit and open some margin for more JUNE scalps or more July positions.

Regards,

Phil
 
CLosed one of my JUNE positions given the surge in the market this past week and the need for some margin to open up.

I closed the 65 SPX JUNE 1110/1125 Bull Put Spreads for a net debit of $0.15. (sold to open for $0.75). This is the first position listed below in the quotes.

So I made a net credit of $0.60 for a profit of $3,900.
Return on margin of $97,500 = 4%.

I still have the other JUNE put spread and the call spread open and the new JULY Put spread I added recently. When the market makes a big move in one direction it is good to take profit on the other side and use that margin for the next month's position or additional scalps.


Quote from optioncoach:



REMINDER OF CURRENT POSITIONS:

65 JUNE SPX 1110/1125 Bull Put Spreads @ $0.75 (NOW CLOSED)

Credit = $4,875
Margin Risk = $97,500
ROM = 5%

55 JUN 1230/1245 Bear Call Spreads @ $0.80.

Credit = $4,400
Margin Risk = $82,500
ROM = 5.33%

Sold 90 JUNE 1110/1120 Bull Put Spreads @ $0.30

Credit = $2700
Margin = $90,000
ROM = 3%

(Do not forget JULY 1110/1125 Put Spread @ $0.80 credit)
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WIth more margin opened up, I will be looking to add some more JULY positions or try and scal another JUNE position.

Regards,

Phil
 
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