SPX Credit Spread Trader

Right after I typed in my message I checked the spreads again and they dropped (the market makers must be monitoring this board lol). I'm hesitant to go with the 1255/1265 and the credit is smaller than I would like on the 1260/1270 now with the dip. I will sit tight and see if we get a rally this afternoon that is worthwhile.

ryan
 
I've read through this fourm and have found that many traders are posing the same question about using the ES as a base index and trading options on futures. Could someone please explain to me:
1) Why would using the ES be better than using the SPX ?
2) What is SPAN margin? With OptionXpress if I have 100K in my account, I can only trade 100K worth of options. Is SPAN different?
3) Why don't many brokers offer options on futures? The only one I know of is IB.

I'm a complete newb when it comes to futures trading, so any help is appreciated.

Thanks,
Shawn


Quote from GATrader:

Phil, enjoy your thread. Could you please tell me why you initiate there positions using the SPX and not the e mini. I looked at the spread during the day and it did not seem to be too wide. Wouldnt you get better margin there due to SPAN? Thanks
One other thing, have you thought of doing it in the 10year notes? As liquid and the options spreads are tighter.
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I was looking at Nov SPX Options. How come not all the strikes are not evenly spread out every 5 strikes. For example, I see 1205 Put, then 1200, (5 point difference) but after that it goes 1190 (10 points) then to 1175(15 points), 1160 then 1150(back to 10 point spread).

Will they open new strikes later on??

Thanks for your help.

Daytrader85
 
The strikes pop up slowly in the far months so you will see gaps. As OCT expiration approaches the strikes start filling in the gaps in the near money strikes.

Phil

Quote from daytrader85:

I was looking at Nov SPX Options. How come not all the strikes are not evenly spread out every 5 strikes. For example, I see 1205 Put, then 1200, (5 point difference) but after that it goes 1190 (10 points) then to 1175(15 points), 1160 then 1150(back to 10 point spread).

Will they open new strikes later on??

Thanks for your help.

Daytrader85
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Quote from optioncoach:

The strikes pop up slowly in the far months so you will see gaps. As OCT expiration approaches the strikes start filling in the gaps in the near money strikes.

Phil
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Oh ok. That's what I thought.

Thanks!
 
Hi Coach,

Thanks for your continued sharing of your trading experience.

When adjusting a credit spread because the underlying index is moving against you, do you ever roll OUT to the next month (either at the same strike or one further away from the underlying)?

Thanks,

modegolf
 
I do not roll OUT to the next month when making an adjustment for several reasons:

1. Rolling OUT just gives the index more time to move against you. Time is your enemy and time decay is your friend. Rolling OUT only improves your "enemy's" position. If the index is really moving, you might simply be delaying the inevitable.

2. Rolling OUT now ties up margin in the next month before you are really ready to focus on positions in the next month. When the current month expires you are now saddled with a rolled out position which could affect your ability to open posiitons in that next month.

3. Always better to roll DOWN first to gain more space. If you run out of space and the index looks like it is gonna roll through you, then better to just cut the line and stop any bleeding as soon as possible and salvage what you can on the other side of the movement and limit your loss as best as possible. If you limit your loss, then you can move on to the next month and focus on those positions and covering that loss and still having a decent profit annually. If the loss occurs in January, you have all year if you need it to get positive. If it occurs in December, you have 11 months of net gains to cushion that loss and perhaps still have a net positive year or at worst a minor loss which you can recover from in the following year. If it happens somehwere in the middle than it is a balance of the two. So rolling out to hope for a reversal and a salvage of the loss may not be the best choice because if the index continues to move towards your short strikes, then you will be taking greater losses perhaps.

Phil


Quote from modegolf:

Hi Coach,

Thanks for your continued sharing of your trading experience.

When adjusting a credit spread because the underlying index is moving against you, do you ever roll OUT to the next month (either at the same strike or one further away from the underlying)?

Thanks,

modegolf
More...
 
I'd like comments on a near-term strategy I'm considering implementing.

1) I've noticed that it's been much more difficult to put on SPX bear call spreads for a decent credit lately. I haven't noticed this on the bull put side. I don't have any hard, comparative, quantitative data at my fingertips, but it just seems that way.

2) So, I'm thinking about putting on a bear call spread for November, even though we are just over 7 weeks away from expiration.

Although this will increase my margin exposure, it's only an increase to the upside. I don't really envision a wipe-out scenario to the upside (as I believe is possible to the downside). So if we have a repeat of last year's move to the upside, I think I could still be able to adjust or get out.

I won't place trades on bull puts until more margin is freed up, because it seems like wipeout scenarios are much more likely to the downside than to the upside.

So, the point of this thread is that if I place Nov SPX bear calls now (to get decent credits), it will increase my margin requirement beyond what I normally do. But I will offset this risk by only placing bear call spreads, where the wipeout scenario is, I believe, far less.

Thoughts, comments, suggestions.
 
The tradeoff you are making is more credit for more risk vs smaller credit for less risk. If you are going to increase your margin by going out to next month, have you looked at selling more contracts in October? This would increase your credit and increase your margin while keeping the time frame short. I guess it would all depend on what strikes and what credit you are looking at and are comfortable with. Just a thought.

ryan

Quote from rdemyan:

So, the point of this thread is that if I place Nov SPX bear calls now (to get decent credits), it will increase my margin requirement beyond what I normally do. But I will offset this risk by only placing bear call spreads, where the wipeout scenario is, I believe, far less.

Thoughts, comments, suggestions.
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Phil,

Appreciate your thoughts on this: I sold SPX 1160/1170 put spreads a few days ago for 0.90. I think I can unload them for 0.55 today. If I can do that, I can then wait for a major dip and grab some 1140/1150 put spreads.

What do you think of this approach (instead of sitting tight and holding to near expiration)?

EDIT -- I doubt I'd be able to buy back at 0.55, so the question is academic now, but I'm still very curious to know your thoughts on this.
 
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