Let us bow our heads to the gods of resistance...
Phil
Phil
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Hi Phil:
1st time poster, but have followed your trades and other web contributions and want to first Thank You for your hard work and the sharing of your knowledge with us.
I also have a 1260/1275 BCS leg in a Condor. And have watched for a good point to perhaps rollup or adjust this position. With the market appearing to be at a short term top in my opinion, it sure has shown a lot of gusto recently... Since you are in a similiar position, what is your thought process regarding a measured retrenching at this time, August is supposed to be a quiet month overall...
Not looking for advice on what to do, just want to understand more how you might read the market and situation right now.
Thanks
Dave
1st time poster, but have followed your trades and other web contributions and want to first Thank You for your hard work and the sharing of your knowledge with us.
I also have a 1260/1275 BCS leg in a Condor. And have watched for a good point to perhaps rollup or adjust this position. With the market appearing to be at a short term top in my opinion, it sure has shown a lot of gusto recently... Since you are in a similiar position, what is your thought process regarding a measured retrenching at this time, August is supposed to be a quiet month overall...
Not looking for advice on what to do, just want to understand more how you might read the market and situation right now.
Thanks
Dave
Sorry for missing your questions:
1. I do like to get in the put spreads on a down day and the call spreads on an up day but I am not necessarily looking for a major swing. As long as I get a good amount of movement then it is a little easier to get in at better fills. If the market is in a nice uptrend than perhaps I may ignore that and just grab the put spread if the credit is good enough.
2. Well I have adopted a trader's memory where I like to have short-term memory for gains and long-term memory for losses. Short-term memory for gains ensures I do not let profits go to my head and divert me from my trading plans. Long-term memory for losses is so they stick with me and the lessons learned are not soon forgotten.
So I do not remember exactly number of adjustments but last year I was not trading SPX spreads as much as I am doing now. I was trading a lot of put ratio spreads on strong trending stocks like RIMM and GOOG. For those I only had one adjustment as I still went far OTM and that adjustment still led to a profit.
THis year I definitely remember that I have not had any adjustments yet. One friend I am "coaching" did have to adjust for JULY since he had 1220/1235 spreads. He rolled up to 1230/1245 which expired worthless for a very small loss but made good money on his puts. Action like that is what keeps losses small and allows winners to acumulate.
Phil
I find novices always do the opposite and that one profitable trade is remembered like the conquest of Troy but all the losses are quickly forgotten and all the lessons with them.
1. I do like to get in the put spreads on a down day and the call spreads on an up day but I am not necessarily looking for a major swing. As long as I get a good amount of movement then it is a little easier to get in at better fills. If the market is in a nice uptrend than perhaps I may ignore that and just grab the put spread if the credit is good enough.
2. Well I have adopted a trader's memory where I like to have short-term memory for gains and long-term memory for losses. Short-term memory for gains ensures I do not let profits go to my head and divert me from my trading plans. Long-term memory for losses is so they stick with me and the lessons learned are not soon forgotten.
So I do not remember exactly number of adjustments but last year I was not trading SPX spreads as much as I am doing now. I was trading a lot of put ratio spreads on strong trending stocks like RIMM and GOOG. For those I only had one adjustment as I still went far OTM and that adjustment still led to a profit.
THis year I definitely remember that I have not had any adjustments yet. One friend I am "coaching" did have to adjust for JULY since he had 1220/1235 spreads. He rolled up to 1230/1245 which expired worthless for a very small loss but made good money on his puts. Action like that is what keeps losses small and allows winners to acumulate.
Phil
I find novices always do the opposite and that one profitable trade is remembered like the conquest of Troy but all the losses are quickly forgotten and all the lessons with them.
Hi Phil,
1) Since SPX trades at such a high value, the overall commissions are substantially lower compared to doing the same ICs on SPY. I'm guessing this is the one and only reason you trade SPX instead of SPY?
2) Do you know of an index to trade the Dow Jones (besides DIA and DJX) which trades in the 1000+ range like the SPX?
Thanks!
1) Since SPX trades at such a high value, the overall commissions are substantially lower compared to doing the same ICs on SPY. I'm guessing this is the one and only reason you trade SPX instead of SPY?
2) Do you know of an index to trade the Dow Jones (besides DIA and DJX) which trades in the 1000+ range like the SPX?
Thanks!
Andy:
1. Well the SPY flat out has no premium. Go more than 1 or 2 strikes out of the money and there is nothing worth selling and that is not far for the S&P 500 to move. The SPX has the larger size and greater premium otm.
My motto is sell the SPX and buy the SPY when trading the S&P 500.
2. As for the DOW, those are the two main shows in town, except you can look into options on futures on the Dow. There you might have more strikes and better chances to sell premium out of the money. Go to the Chicago Mercantile Exchange site to look into it.
Phil
1. Well the SPY flat out has no premium. Go more than 1 or 2 strikes out of the money and there is nothing worth selling and that is not far for the S&P 500 to move. The SPX has the larger size and greater premium otm.
My motto is sell the SPX and buy the SPY when trading the S&P 500.
2. As for the DOW, those are the two main shows in town, except you can look into options on futures on the Dow. There you might have more strikes and better chances to sell premium out of the money. Go to the Chicago Mercantile Exchange site to look into it.
Phil
Hi Phil,
Your thread is one of the most useful out there! Thank you for sharing your experience.
When the underlying moves against a position, you have mentioned rolling up/down to a further out set of strikes, closing the position, or "buying insurance" (hedging by buying SPY options).
Is there a thought process or decision making checklist you can share with us? Are you just trying to find the way that limits the loss the best?
I just ordered your book, but can't wait!!
Thanks again,
modegolf
Your thread is one of the most useful out there! Thank you for sharing your experience.
When the underlying moves against a position, you have mentioned rolling up/down to a further out set of strikes, closing the position, or "buying insurance" (hedging by buying SPY options).
Is there a thought process or decision making checklist you can share with us? Are you just trying to find the way that limits the loss the best?
I just ordered your book, but can't wait!!
Thanks again,
modegolf
Not feeling 100% comfortable with my 1260/1275 Call Spread with SPX at around 1243. I still some some headwinds and light August trading so I am not inclined to adjust yet but I did add a partial hedge.
I bought 45 SPY AUG 126 Calls @ $0.45 ($2,025).
I have about $7,000 in credit in my SPX Call Spread so I do not mind spending a part of it for some insurance.
If SPX moves above 1245 with some strength then I will have to strongly consider rolling the spread higher. Especially with 2 1/2 weeks to expiration. The SPY calls should provide some profit to offset the cost of rolling higher and reduce my potential loss somewhat if I do need to make the adjustment.
If it does move higher then in addition to rolling my calls higher I will take profits on the puts and open a new put position at higher strikes. The key is to take in as much premium from the new calls and new puts and profit from the previous puts and SPY calls to manage potential losses or even salvage a small profit if possible.
Let's see what happens.
Phil
I bought 45 SPY AUG 126 Calls @ $0.45 ($2,025).
I have about $7,000 in credit in my SPX Call Spread so I do not mind spending a part of it for some insurance.
If SPX moves above 1245 with some strength then I will have to strongly consider rolling the spread higher. Especially with 2 1/2 weeks to expiration. The SPY calls should provide some profit to offset the cost of rolling higher and reduce my potential loss somewhat if I do need to make the adjustment.
If it does move higher then in addition to rolling my calls higher I will take profits on the puts and open a new put position at higher strikes. The key is to take in as much premium from the new calls and new puts and profit from the previous puts and SPY calls to manage potential losses or even salvage a small profit if possible.
Let's see what happens.
Phil
Andy:
They do look promising and I would love to start adding them in but OptionsXpress has been slow in adding futures and options and futures. I really want the money in one place so have not put separate money in IB. However, I like the premiums and additional flexibility they offer, especially hedging them with the futures themselves.
So to date no real trades to post here, just trying to become as familiar as I can.
Phil
They do look promising and I would love to start adding them in but OptionsXpress has been slow in adding futures and options and futures. I really want the money in one place so have not put separate money in IB. However, I like the premiums and additional flexibility they offer, especially hedging them with the futures themselves.
So to date no real trades to post here, just trying to become as familiar as I can.
Phil
Phil,
"I bought 45 SPY AUG 126 Calls @ $0.45 ($2,025)."
1) Can you please walk us through how you came up with 45 contracts?
2) What is the tradeoff if you close the position right now instead of hedging with the SPY calls?
3) Why didn't you just buy 5 SPX calls instead of ~50 SPY calls?
Thanks!
"I bought 45 SPY AUG 126 Calls @ $0.45 ($2,025)."
1) Can you please walk us through how you came up with 45 contracts?
2) What is the tradeoff if you close the position right now instead of hedging with the SPY calls?
3) Why didn't you just buy 5 SPX calls instead of ~50 SPY calls?
Thanks!