SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Well even if you have to wait until Monday that is still pretty good. Looks like we are controlling things over there huh, adding strikes! lol.
Phil
Phil
I don't think that you are correct that a qty one 25 point spread is equal to a qty 2.5 10 point spread assuming that you can get the same total price for both.
The qty one 25 point spread is a much better deal because to lose all your money the market would have to fall 15 points farther with the 25 point spread.
Don
Point taken. I was only thinking of premium taken in, but you make a good point. On the other hand, our mantra is to manage risk which means that we would never allow a complete loss and would adjust before the short strike is breached (unless there is a major catastrophe where there is no time to do this).
Coach:
Given Don's point and assuming we can get equivalent premiums as mentioned in my post, why not consider 25 point spreads?
Coach:
Given Don's point and assuming we can get equivalent premiums as mentioned in my post, why not consider 25 point spreads?
One thing with wider spreads is that the long option is not as helpful to hedge against your short when the market starts moving against you. This might be relevant when you need to by back the spread to roll down. However on the flip side, it does not reach maximum loss as early as compared to a 5-point spread and when you do roll down you will still get a lot of premium since you are selling another wide spread.
I would not make the argument that 10 5-point spreads are the same as 5 10-point spreads, etc... because commissions, deltas and thetas are all different the wider the spread becomes and this could affect you when or if it comes time to adjustments.
Better to focus on the best strikes based on your analysis and the premium you are getting then looking to equate a potential 10-point spread using 25-point wide strikes. There are pros and cons of wider strikes so the choice comes down to which you prefer and not that they are somehow "equivalent"
Phil
I would not make the argument that 10 5-point spreads are the same as 5 10-point spreads, etc... because commissions, deltas and thetas are all different the wider the spread becomes and this could affect you when or if it comes time to adjustments.
Better to focus on the best strikes based on your analysis and the premium you are getting then looking to equate a potential 10-point spread using 25-point wide strikes. There are pros and cons of wider strikes so the choice comes down to which you prefer and not that they are somehow "equivalent"
Phil
Phil,
Are you comfortable that we have started a rally that will continue to expiration (i.e. the downside plunge has halted)?
I'm wondering if, from a risk management perspective, it might make sense to roll put the put side today buy another 10 points or so, while it is cheap to do so?
Are you comfortable that we have started a rally that will continue to expiration (i.e. the downside plunge has halted)?
I'm wondering if, from a risk management perspective, it might make sense to roll put the put side today buy another 10 points or so, while it is cheap to do so?
Easy.... it was Yom Kippur and I was out yesterday! You do not need big ones if you are not even watching the market 
.
Actually that is the main reason I adjusted on Wednesday, because I was going to be out on Thu and even if it was a bad day I would still not be ITM and have time on Friday to adjust if need be. I did check the market after lunchtime (SIN!) and saw that it was rebounding so I decided to let it be. BY close of the market the huge turnaround made me even more comfortable hoping for a Friday rally. SO I sinned slightly and kept an eye on things through CNBC once in a while and I was a little nervous at 1:30 but seeing the market slowly move higher in the late afternoon made me relax.
But if the market stayed down on THU and looked dicey on Friday, then I would have adjusted down. Bottom line is I have to stick with the plan no matter what to keep my spread in front of the market.
But I also had some feelings that we truly overextended the sell side and any simple news would help give us an upday. Today's news on tamer than expected inflation (nothing major really since it is constantly revised) was enough to get the buyers out, even though the Michigan index dipped. But this could also be the worst of the worst the preceeds some more buying. 1180 is starting to act like the magnet that 1190 did for a few days.
It is still early in the day but if we can close near 1180 today I will be quite happy heading into expiration week where theta will become my new lover
Phil
.Actually that is the main reason I adjusted on Wednesday, because I was going to be out on Thu and even if it was a bad day I would still not be ITM and have time on Friday to adjust if need be. I did check the market after lunchtime (SIN!) and saw that it was rebounding so I decided to let it be. BY close of the market the huge turnaround made me even more comfortable hoping for a Friday rally. SO I sinned slightly and kept an eye on things through CNBC once in a while and I was a little nervous at 1:30 but seeing the market slowly move higher in the late afternoon made me relax.
But if the market stayed down on THU and looked dicey on Friday, then I would have adjusted down. Bottom line is I have to stick with the plan no matter what to keep my spread in front of the market.
But I also had some feelings that we truly overextended the sell side and any simple news would help give us an upday. Today's news on tamer than expected inflation (nothing major really since it is constantly revised) was enough to get the buyers out, even though the Michigan index dipped. But this could also be the worst of the worst the preceeds some more buying. 1180 is starting to act like the magnet that 1190 did for a few days.
It is still early in the day but if we can close near 1180 today I will be quite happy heading into expiration week where theta will become my new lover
Phil
Quote from rdemyan:
Coach:
You adjusted down to the 1165 short strike and held on yesterday even though I think the SPX low was around 1168-1169. You've certainly got bigger ones than I do, but you've been right twice.What led you not to adjust yesterday.
rdemyan,
I have 1155/1165 as well and it was excruciating to watch as SPX danced around 1168 yesterday -- twice. But, I made a decision to roll at 1165 and stuck with it.
Fortunately, my the 1210/1200 hedges (i.e. buy 1210 put, sell 1200 put) that I bought at the time of putting on the condor itself, had kicked in since I bought them for $2 and they were worth $9 yesterday -- so that offered some relief.
Ultimately though, I was prepared to take a 10% to 15% loss this month -- and I think it is this realization that made the difference. The way things are today though (and assuming they will stay this way through exp), I'll be up around 13% this month even after the adjustments and hedges. Phil has asked us to share our results after expiration and I'll certainly do so.
I have 1155/1165 as well and it was excruciating to watch as SPX danced around 1168 yesterday -- twice. But, I made a decision to roll at 1165 and stuck with it.
Fortunately, my the 1210/1200 hedges (i.e. buy 1210 put, sell 1200 put) that I bought at the time of putting on the condor itself, had kicked in since I bought them for $2 and they were worth $9 yesterday -- so that offered some relief.
Ultimately though, I was prepared to take a 10% to 15% loss this month -- and I think it is this realization that made the difference. The way things are today though (and assuming they will stay this way through exp), I'll be up around 13% this month even after the adjustments and hedges. Phil has asked us to share our results after expiration and I'll certainly do so.