SPX Credit Spread Trader

[andysmith]

You can read more about riskarb's double butterflies here:
http://www.kaininito.com/options/articles/

The problem with these is that right now, with such low vol, the middle of the double fly dips below the zero line....

Quote from riskarb:

Sure, for something that's passive; combo-atm butterflies -- take the Nov 1175 SPX strike and structure a bull and bear call and put fly w/long outright and curvature[gamma]:

Long 1175/1200/1225 call fly
Long 1175/1150/1125 put fly

Flies carry the best attributes of gamma -- short concavity, long convexity of curvature. You're holding a superior risk-reward and there is no need to adjust unless you're attempting to bank gains.

No risk atm, only 2sigmas up/down at expiration for a small debit.

 

[riskarb]

Quote from andysmith:

You can read more about riskarb's double butterflies here:
http://www.kaininito.com/options/articles/

The problem with these is that right now, with such low vol, the middle of the double fly dips below the zero line....

Obviously there is more to it[abs vol] but regardless of vols the same strike otm combo fly is underwater at expiration at the middle, combo strike. Only way to avoid that scenario is to get the long call and put fly on at a credit or use a gut strike pair.

 

[daytrader85]

Quote from andysmith:

You can read more about riskarb's double butterflies here:
http://www.kaininito.com/options/articles/

The problem with these is that right now, with such low vol, the middle of the double fly dips below the zero line....

I went to the link. It looks interesting. But I have a question.

How do you set up a butterfly with middle strikes $3 apart? I like how the profit zone is a lot wider in this type of trade.

I know $2 strike difference is equaivalent to an IC.

Ex.:
Buy 33 Put
Sell 34 Put
Sell 36 Call
Buy 37 Call

Thanks.

Daytrader85

 

[JET_DRIVER]

Riskarb

A quick question? In an earlier post you mentioned a friend you have from the CBOE named JS that made a very healthy sum in the OEX. Was he a First Op MM with the accro JIZ.

Just wondered.

 

[JET_DRIVER]

Quote from Dr. Zhivodka:

Greetings JET

Welcome.

If you don't mind.....why do you prefer the diagonal verses the straight vertical? I know that it eliminates your vega risk but are there other reasons? This would be more of ratio write to make that a credit ...yes? Do you ratio to vega neutral? If so then how do you maintain your credit. Sorry....I'm surely missing something simple here.

Also, when your front short strike expires do you roll into a vertical then? Or do you lift your long strike too and make another diagonal?

Dr Z

first, I trade this as a package. If I sell a 3.00 put I will buy a .60 protective put.

second, by the time the trade has moved against me, two or three weeks have past. If you buy protection in the front month it has decayed to the point that it losses it's ability to protect.

third, it does provide some vega/gamma protection.

 

[riskarb]

Quote from JET_DRIVER:

Riskarb

A quick question? In an earlier post you mentioned a friend you have from the CBOE named JS that made a very healthy sum in the OEX. Was he a First Op MM with the accro JIZ.

Just wondered.

First Ops before SLK, yeah. Don't know what his acronym was, as I met him off the floor. I met him through a buddy who clerked for him as well. The clerk has the initials PM.

Until now I thought his name was Silverman.

 

[JET_DRIVER]

Quote from rdemyan:

Okay you professionals that contribute to this thread, here's a question for you.

The Nov 1120 just got added today. I'm trying to place the following:

Nov SPX 1110/1120 bull put credit spread for $1.00

Here are the bid/asks for each leg:

1110: 2.75/3.40
1120: 0.00/0.00

I understand that the 1120 was just opened and no b/a yet. That's why I placed an unreasonably high credit amount of $1.00 to see if I could get a process started so that I could then adjust the amount. But nothing is happening.

Why doesn't the mere prescence of my order start to generate bid/asks on the 1120.

Well.....If there is no current b/a you could use last trade. In absence of that the 1120 put should trade at a value 50% of the way between the 1125 and 1115.

If 1125 are 5
the 1115 are 3
the 1120 should be about 4

 

[JET_DRIVER]

Quote from riskarb:

First Ops before SLK, yeah. Don't know what his acronym was, as I met him off the floor. I met him through a buddy who clerked for him as well. The clerk has the initials PM.

OK....this is getting a little WEIRD.

I used to clerk for JIZ when he was at first op.

MY initials are PM.

It would of been about 1989 when I was 24 years old. Do we know each other??? You can private message me with the details.....

 

[JET_DRIVER]

OK....this is getting a little WEIRD.

I used to clerk for JIZ when he was at first op.

MY initials are PM.

It would of been about 1989 when I was 24 years old. Do we know each other??? You can private message me with the details.....

His name is actually Silberman with a "b"

He lives in Aspen now. They used his house in the movie, ASPEN EXTREME.

 

[LoosenUp]

Quote from Pabst:



Just buy the friggin spread and hedge the decay by buying breaks and selling rallies! [/B]

Hi Pabst,

Is buying the friggin spread a +ve expectancy? Does buying breaks and selling rallies generate +ve expectancy? Only if you get the timing right. So, forget the friggin spreads, just trade the underlying!