SPX Credit Spread Trader

Coach-

Good job on the journal. I also trade options for a living and just wanted to throw out a piece of advice for some of your followers that maybe don't understand the greeks as well as you do.

<B>WATCH OUT FOR GAMMA!!!</B>

I would not be entering any close September spreads with only a week left to expiry. Sooner or later you will get your head taken off during gamma week. During the last week, those slightly OTM short options can triple in price in the blink of an eye. If you need to adjust, roll 'em out to Oct.

Just a word of caution.

Cheers and GTTY
 
Well it was July and it was a battle between gamma and delta (where was Godzilla?) but the resistance of 1225 won in the end lol.

Phil

Quote from Dr. Zhivodka:

I think OC saw that last month with that 1230 short strike going from 80 cents to $3 overnight.

:cool:
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Ah yes....July.

It was a nice hold though...but that risk management went right out the window. But that's gamma week for ya.

I was in the same trade sweating bullets.
 
That was a triple witching day too so a wild SET can happen. September is a wild witching day too I believe so you can see why I adjusted today ;)

Phil

Quote from codyhopkins:

Let's not forget that in June the SPX SET was up $12.00 from the previous day close. Pev day close 1210, SET 1222!
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I rolled my Sept call spreads too. Next week could get real jiggy.



Quote from optioncoach:

That was a triple witching day too so a wild SET can happen. September is a wild witching day too I believe so you can see why I adjusted today ;)

Phil
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Basically, the SPX options expire on Thursday before the 3rd Saturday in the month and the settlement value of the index for purposes of getting the final SPX value is based on the opening prices Friday morning of all 500 stocks in the index. Not every stock opens right at 9:30 Friday morning so it takes some time before the final SPX value is determined. WHen it is, the CBOE publishes it on their website.

This is quite meaningful if you have a 1240 short call and the index is at 1238 at the end of the day on Thursday. You may think your option is OTM and will expire worthless but Friday all stocks can open higher and the final value of the SPX can be calculated as 1243! Then your short call is ITM and you will be assigned and you have no choice because they stopped trading the day before.

Go to the CBOE website, under Index Options look up SPX and read about settlement value for the full scoop.

Phil

Quote from daytrader85:

What does SET mean??

Thanks.

Daytrader85
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