SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
I was able to get out of my Sep 1250/1260 on Wednesday and make a decent profit. I have now opened up the following:
1160/1170 put spread: $.60 credit
1280/1290 call spread: $.90 credit
I was tempted yesterday to close the 1280/1290 for a profit and open a 1275/1285 for around $.90 but didn't want to lower my short strike, if anything I need to roll up, not down.
ryan
1160/1170 put spread: $.60 credit
1280/1290 call spread: $.90 credit
I was tempted yesterday to close the 1280/1290 for a profit and open a 1275/1285 for around $.90 but didn't want to lower my short strike, if anything I need to roll up, not down.
ryan
Thanks Dr.! From what I read at the CBOE site, they will begin trading on Friday and expire the following Friday but will not trade during actual option expiration week. I think they will be great for short-term plays around specific events. As for selling premium, not too sure how it will work until I see some actual pricing when they are launched.
Since they will not trade during expiration week, they cannot be used to hedge during that week but perhaps if some unsettling news is occurring they can be added quickly to hedge for a few days.
Should be quite interesting but I think I will get a better feel when I see some pricing.
Phil
Since they will not trade during expiration week, they cannot be used to hedge during that week but perhaps if some unsettling news is occurring they can be added quickly to hedge for a few days.
Should be quite interesting but I think I will get a better feel when I see some pricing.
Phil
I have been looking into using the ES options for credit spreads on and off again. Unfortunately both brokers I use do not have options on futures and I do not have a lot of confiendnce in IB's system to trust my money there. But there are options on the Es and the E-mini. Es options are $250 per point and E-minis are $50 per point. The underlying is the delivery of the futures contract for the next available month (i.e., MAR, JUNE SEPT, DEC).
There is a lot of great information on the options on futures at the Chicago Merc website www.cme.com.
There seems to be enough liquidity to trade this OTM or use them for hedging purposes. Either OX or Tos will add them or I will have to put some money in an account at IB lol.
They are certainly worth looking into and I am still studying them. I like to do research before putting any money in.
Phil
There is a lot of great information on the options on futures at the Chicago Merc website www.cme.com.
There seems to be enough liquidity to trade this OTM or use them for hedging purposes. Either OX or Tos will add them or I will have to put some money in an account at IB lol.
They are certainly worth looking into and I am still studying them. I like to do research before putting any money in.
Phil
you probably realize that with SPX move of 5% in any direction , you will lose 8.5 points(about six month of gains). SPX moved seven times above 5% in the last 36 month, so P&L( without adjustments) looks like this:
loss=7*8.5=59.5
gain=29*1.5=43.5
total=(-16) points plus comm.
unless you do the right adjustments in critical times...
IMO
So, you said this kind of trade has negative expectancy unless adjustment is done correctly.
How about instead of mechanically open the position, we look at trends, the directional of market, and wait for down day or up day ? I guess that would increase the expectancy.
What do you think of openning positions ATM instead of OTM for maximum profit ?
How about instead of mechanically open the position, we look at trends, the directional of market, and wait for down day or up day ? I guess that would increase the expectancy.
What do you think of openning positions ATM instead of OTM for maximum profit ?
My only problem with negative expectancy is that it assumes you will take the maximum loss each time the market moves towards your short strike. Given the movement of the SPX index there is no reason why you would ever take the maximum loss. First, given that it is a spread, it will never be worth the maximum value until expiration day where all time value is removed or if it is deep deep deep ITM. There is no reason whatsoever to hold this position if the short strike is pierced. That is why we discuss adjustments at 10 or 15 points out. Even on a large move lower due to overnight terrorist attacks, the spread will not reach maximum value.
So you have to take expectancy numbers with a huge grain of salt. The cannot take into account when you will make adjustments or how much a loss will really be. For example, I made an adjustment this month and still have a net loss. The market cooperated. Even if it did not, I could have still rolled out with a small loss.
The key to any success in trading is not what strategy you pick or how you pick your underlying, but how you manage the risk of the trade before the position is even opened and while the position is opened, whether it is moving your way or moving against you.
Remember all, risk management is what makes a strategy work, not just selecting deep OTM strikes and waiting until expiration.
Good luck!
Phil
So you have to take expectancy numbers with a huge grain of salt. The cannot take into account when you will make adjustments or how much a loss will really be. For example, I made an adjustment this month and still have a net loss. The market cooperated. Even if it did not, I could have still rolled out with a small loss.
The key to any success in trading is not what strategy you pick or how you pick your underlying, but how you manage the risk of the trade before the position is even opened and while the position is opened, whether it is moving your way or moving against you.
Remember all, risk management is what makes a strategy work, not just selecting deep OTM strikes and waiting until expiration.
Good luck!
Phil
SEPTEMBER SPX Settlement @ 1232.79.
SPX closed THU at 1227 and change.
I will update my SEPT positions once my broker updates the screen to account for the final SET on the SPX.
Phil
SPX closed THU at 1227 and change.
I will update my SEPT positions once my broker updates the screen to account for the final SET on the SPX.
Phil