SPX Credit Spread Trader

I'm still trying to get a fill on the following bear call spread:

SPX Sept 1255/1270 for a $0.40 credit

As I write this, the b/a spread is 0.25/0.7 with the SPX down -4.43 at 1207.94.

It seems like I should get filled, but I'm getting a little frustrated.

Coach: I'm feeling tempted to try to leg into this trade.

1270 b/a is 0.1/0.25

1255 b/a is 0.5/0.8

I've always felt that it is too risky to try to leg into spreads (although I have legged out of spreads when there is little value left very successfully; sometimes even at zero cost (not including commissions)).

Coach: What's your opinion on trying to leg into the individual positions of a spread?
 
First, take the word "should" out of your vocabulary and throw it out the door and then lock it tightly so it can never get back in again.

Imagine you are selling your house for $250,000 and someone offers you $210,000 and tells you that you SHOULD accept their offer even though it is not at the price you are will to accept. I am sure you would politely introduce your foot to his ass.

Same with a bid/ask spread. If your price is sell is not at the bid, the market makers have the right to NOT accept your limit price. So it is hard to say it should get filled. Now with the SPX it is easy to get a better price than the bid and many times you need to leave an offer on the table a long time. But with the market dropping, do not expect market makers to trip overthemsleves to "buy" your spread at a price between the spread.

The only thing you can do is leave the order there and lower the bid if the lower price is still suceptible to you.

I do not recommend legging in or out of a spread. I was just testing the waters on this on Wednesday and I got a little screwed on it even though I still got out with a profit. If you can split the b/a well on one leg you might get stuck with the other leg and the market could hurt you. The 1980's are over so no leggings (a la Olivia Newton John "Physical" lol).

Phil

P.S. re-reading my post the tone my seem nasty but no such tone intended, just imparting some wisdom ;)

Quote from rdemyan:

I'm still trying to get a fill on the following bear call spread:

SPX Sept 1255/1270 for a $0.40 credit

As I write this, the b/a spread is 0.25/0.7 with the SPX down -4.43 at 1207.94.

It seems like I should get filled, but I'm getting a little frustrated.

Coach: I'm feeling tempted to try to leg into this trade.

1270 b/a is 0.1/0.25

1255 b/a is 0.5/0.8

I've always felt that it is too risky to try to leg into spreads (although I have legged out of spreads when there is little value left very successfully; sometimes even at zero cost (not including commissions)).

Coach: What's your opinion on trying to leg into the individual positions of a spread?
More...
 
I have tried t sell put spread about six times and can't get a fill at 0.15 off the mid. Today I had one that I tried to sell at $1.35 and could not get a fill when the mid was 1.70. When I looked at the daily put volume it was much higher that the call volume. It appears that I wn't be able to sell any SPX spreads this month.

qamhwr
 
I cannot imagine why you are not getting filled at all. It depends on the wideness of the b/a spread times. A really wide b/a spread will require more shaving than a narrow one.

One piece of advice I learned from my many trades this month is with really wide b/a spreads, take the distance between the BID and the b/a MIDPOINT and go in the middle of those. So if the bid ask is $1.00/$2.70, the mid-point is $1.85.

The middle of the BID and the MIDPOINT is $1.45 (round up). See if you can get a fill at that price. For wider spreads, I feel I have to shave more off the mid-point and the steps I described aove is a quick and dirty method ot select a price to place as a limit order. The more you do this the more you might take the point and then simply ADD $0.10 and use that price.

It is not uncommon for me to leave a limit order up for an hour or so and then get filled or have to adjust another nickle or dime. Basically we are trying to beat the BID as best we can and it gets harder to work the b/a midpoint on really wide spreads.

Phil




Quote from qamhwr:

I have tried t sell put spread about six times and can't get a fill at 0.15 off the mid. Today I had one that I tried to sell at $1.35 and could not get a fill when the mid was 1.70. When I looked at the daily put volume it was much higher that the call volume. It appears that I wn't be able to sell any SPX spreads this month.

qamhwr
More...
 
A lot of times you just have to enter in the order and walk away for a bit. It is unusual for me to have an order filled right away. Most of the time it sits there for quite a while waiting for the market to move in my favor for getting filled. There have also been a number of times where I don't get filled at all. I just look at the b/a spread again, look at the market and see if the risk/reward still makes sense and adjust as needed (change credit or strikes). It can be frustrating but I have worked really hard over the last 6 months to get my emotions out of the way and just take what the market gives me.

ryan


Quote from rdemyan:

I'm still trying to get a fill on the following bear call spread:

SPX Sept 1255/1270 for a $0.40 credit

As I write this, the b/a spread is 0.25/0.7 with the SPX down -4.43 at 1207.94.

It seems like I should get filled, but I'm getting a little frustrated.

Coach: I'm feeling tempted to try to leg into this trade.

1270 b/a is 0.1/0.25

1255 b/a is 0.5/0.8

I've always felt that it is too risky to try to leg into spreads (although I have legged out of spreads when there is little value left very successfully; sometimes even at zero cost (not including commissions)).

Coach: What's your opinion on trying to leg into the individual positions of a spread?
More...
 
Well said....

Quote from ryank:

A lot of times you just have to enter in the order and walk away for a bit. It is unusual for me to have an order filled right away. Most of the time it sits there for quite a while waiting for the market to move in my favor for getting filled. There have also been a number of times where I don't get filled at all. I just look at the b/a spread again, look at the market and see if the risk/reward still makes sense and adjust as needed (change credit or strikes). It can be frustrating but I have worked really hard over the last 6 months to get my emotions out of the way and just take what the market gives me.

ryan
More...
 
Coach:

I'm thinking about placing an October Iron Condor 7 weeks to October expiration. What I'm thinking is that it might not be a bad idea to place 5 pt. spreads instead of the usual 15 point spreads. The credits look to be fairly decent as of Friday's close (Hurricane Katrina notwithstanding).

SPX Oct 1275/1280 bear call for around $0.40 to $0.45
SPX Oct 1130/1125 bull put for around $0.40 to $0.50.

Of course the b/a is large and on the put side there are few possiblities with a 5 point spread.

I know the Hurricane is going to significantly impact the credits, but in principal, I'm not sure why I wouldn't want to place one such trade in preparation for my October positions. It seems like one could get a relatively high return for the margin risk. The biggest problem right now is finding strike prices that are only 5 points apart.

I'm curious as to what your take is on this and do you ever put on spreads that are just 5 points apart.
 
5-point spreads are fine, I just always have a lot of trouble splitting those bid ask spreads. Once in a blue moon I get one I like but all that really matters is the risk/reward characteristics and short strike selection, so if it meets your criteria and you can get filled then go for it. I am gonna wait maybe another week befoer I look at October given the time to expiration and my current focus on the Sept positions.

Katrina will just be a morning over reaction so give it a day and the effects will wash out. If the prospective IC fits your criteria then go for it. As for 5-point spreads, many times harder to split the b/a but not impossible.

Phil


Quote from rdemyan:

Coach:

I'm thinking about placing an October Iron Condor 7 weeks to October expiration. What I'm thinking is that it might not be a bad idea to place 5 pt. spreads instead of the usual 15 point spreads. The credits look to be fairly decent as of Friday's close (Hurricane Katrina notwithstanding).

SPX Oct 1275/1280 bear call for around $0.40 to $0.45
SPX Oct 1130/1125 bull put for around $0.40 to $0.50.

Of course the b/a is large and on the put side there are few possiblities with a 5 point spread.

I know the Hurricane is going to significantly impact the credits, but in principal, I'm not sure why I wouldn't want to place one such trade in preparation for my October positions. It seems like one could get a relatively high return for the margin risk. The biggest problem right now is finding strike prices that are only 5 points apart.

I'm curious as to what your take is on this and do you ever put on spreads that are just 5 points apart.
More...
 
Over reaction by the market to a storm that will blow oever quite quickly. I did not expect the oil spike or market drop to last too long. In fact I went long ES futures at around 10:10 with the SPX at 1203.50 and the S&P is right now is over 1207.

I am not looking to consider any adjustments until the SPX moves below 1290.

Hold tight and let time decay kick in...

Phil


Quote from andysmith:

Phil,

Looks like we might have to adjust the 1165/1175 put spread tomorrow (assuming you still have your position).
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