SPX Credit Spread Trader

Quote from optioncoach:

Today's upsruge boosted the call premiums and I decided to take on an expiration week scalp.

Sold 50 JUL SPX 1230/1245 Call Spreads @ $1.00 (SPX @ 1218)

Credit = $5,000
Margin = $75,000
ROM = 6.67%

This is admittedly riskier than my normal positions given the distance OTM. However, with 3 days to expiration and 1220 a previous resistance point which has continued to hold, I decided the odds seem favorable to scalp some premium in the next two days. We had a good up day on Friday and so far today so a down day tomorrow or Wednesday is probably which will help suck out some premium in my calls. Theta should be much stronger if we can get one good down day this week and I intend to hold as long as 1220 resistance holds.

Again, this is riskier than my usual but every once in a while I like to take some credit where the analysis seems to warrant it.

Regards,

Phil
More...
Ouch. This one's getting close.

I have it as about a -$9,000 loss if closed at current quotes right now and the Auggie call spread is about -$18,000 in the red. Still lots of time on the Aug tho.

Since settlement is tomorrow morning, you'll probably be fine...but there IS about a -$60,000 risk on those 50 calls!

Hang in there Coach. We are hoping you get a pullback!

Regards.

C
 
I can't belive someone is advocating a 15:1 risk:reward by selling a short call spread with a 30d risk-strike. This is suicide.
 
Quote from Choad:

Since settlement is tomorrow morning, you'll probably be fine...but there IS about a -$60,000 risk on those 50 calls!
More...


With all the weirdness and anomalies of SPX and NDX settlement I don't think I'd wait until settlement to take my spanking. Last months NDX settlement is one to study. But everyone has their own personal risk/reward profile.
 
In case anybody doesn't know where to get the SPX settlement price, it is symbol ^SET on Yahoo Finance.

Good luck to all.
 
Just thinking out loud:

After Apple and AMD reported, it would have been possible to hedge the calls by buying ES long last night -- although the magnitude of today's move wasn't evident then.

Once SPX moved above 1230 it would have been irresponsible not to hedge -- to me at least.

I don't see why this position would have had to absorb any/significant losses if the above were done to manage it.

On the other hand, if you woke up and saw that opening gap on your screen your intestinal fortitude might have been in for a run...
 
Remember that paper losses on OTM strikes can sway you emotionally but the AUG 1260 calls are still far from being ITM.

AS for my 1230 JULY Calls, the market has pulled back and I have not closed out the position yet. I can do it right now for about a $1,800 loss but am still holding back due to the weakness in the rally. We have had 5 up days and a strong week so I am looking for the rally to fizzle. Let's see what happens around 3:00 PM.

Remember that I already booked $13k or so in profits this month so I have to take a $2k or even $5k loss I am still ahead with half the month left to trade. I am on top of this all day and will update if I take any action.

As I said when I opened it, the 1230 spread was riskier than my normal trades but still the 1230 limit is holding as for now. That is why I went in with 50 contracts only, so that a small loss would not cost me much relatively.

Let's see the sprint to 4PM!

To riskarb:

To each his or her own, credit spreads never have favorable risk/reward ratios on paper. It is putting the odds in your favor that makes the trade more worthwhile. However I would not recommend this style to anyone. As I have detailed I am not 100% loaded in this strategy and have quite a cushion to accept reasonable losses. It is always about risk management.

Phil
 
No one is advocating anything, I am journaling my trades to demonstrate this style of investing and open a discussion.

Phil


Quote from riskarb:

I can't belive someone is advocating a 15:1 risk:reward by selling a short call spread with a 30d risk-strike. This is suicide.
More...
 
You must log in or register to reply here.
Back
Top