SPX Credit Spread Trader

Osho:

I have not explored calendars in this thread because I do not think they are compatible with what I am trading here. I use calendars sparingly on stocks when there is an FDA announcement or significant earnings where a large skew occurs and I can place a type of home run trade taking advantage of the skew. But not for this kind of trading.

I am not a big fan of calendars and maybe trade 3 or 4 a year at most. So I am not the best person to ask about calendars.


Quote from osho67:

Smilingsynic

Optioncoach

I am going back to page 180 for your replies.Thanks for giving me the proper name about reverse calendar spread.

Smiling- You said it would be better to buy Dec and sell Nov. Will this bring me a credit?

Optioncoach- You have not explored use of calendars in great detail. I will much appreciate if you can give some time to explore this strategy.

Thanks to both of you.
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Thanks Smiling and Optioncoach for your replies.

At the moment I an selling naked puts on indices and futures. I only use 50% of my capital. Now I am scared that someday my account will get wiped out. So the quest is there what to do. I want to earn premium month after month and I am searching how best it can be done. Any broad pointers would be helpful. Thanks
 
The only thing I can say is selling naked puts is pretty risky given the nature of the strategy. If selling puts is the strategy you are most comfortable with with respect to the indices why not look into doing it with credit spreads. If you are willing to commit X% of your capital you can probably risk less than that doing spreads and still achieve good returns without the significant risk of naked options. For example if you were selling puts backed by $50,000, then perhaps you can just use $30,000 and sell credit spreads. I am just using examples but you can play around with it and see.

Also, naked puts are more susceptible to IV spikes on a downward move than spreads are.

As for stocks, if you are selling puts on stocks you would not mind owning if assigned then perhaps you can stick with that as long as you are aware of the risks.

Quote from osho67:

Thanks Smiling and Optioncoach for your replies.

At the moment I an selling naked puts on indices and futures. I only use 50% of my capital. Now I am scared that someday my account will get wiped out. So the quest is there what to do. I want to earn premium month after month and I am searching how best it can be done. Any broad pointers would be helpful. Thanks
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Similing, you wrote: "Plus no risk of catastrophe, as in the case of "credit spreads."
Is this because the risk/reward ratio is better? Please explain, thanks.


Quote from smilingsynic:

No, it would be a debit spread, not a credit spread. BUT you would be long vega, not a bad thing when vega is rising. This would be a good position to have if vol did not go back down to its earlier lows and instead stayed up. Calendars are good to leg into as well (buy calls when market is down, sell shorter term calls of same strike when it goes up). Plus no risk of catastrophe, as in the case of "credit spreads."

Good luck.

Calendar spreads are safer than debit spreads, but they do involve several commissions, as do all spreads.
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The SPX giveth and the SPX taketh away. Boy am I glad I closed out my 555 XEOs cause the market was at 554. Of course it is now 545.55 lol.

Some people must be getting whipsawed like crazy!

Quote from gatorplease:

Just a little volatility, huh!?!

Now I'm glad I'm out of the 1170 Puts. I feel schizophrenic.

SET tomorrow will probably be 1250! LOL
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Quote from andysmith:

I found this ET thread about the benefits of ES options over SPX options to be quite interesting reading (for after the expiration exhaustion!). I'm sure Phil's techniques work just as well with ES options.

http://www.elitetrader.com/vb/showthread.php?s=&postid=856400#post856400
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There's a not completely useless book that discusses credit spreads on futures options if you're interested:

http://www.amazon.com/exec/obidos/t...102-0526283-8510540?v=glance&s=books&n=507846

Does a decent job of covering the in's and out's of SPAN margining etc. The short version is that you get more bang for your buck. Didn't buy the book just flicked through it.

Unfortunately my broker doesn't yet support options on futures :(

Was going to ask Phil if we could tag team TOS into submission on this point but....am too lazy.

Will probably go with Tradestation or other eventually for this purpose.

Momoney.
 
I already spoke with ToS on this issue and some of the guys there would love to have options on futures since many trade them. But they said for now they are not going to offer it. It goes by client demand and regulatory issues so they might do it down the road but not now.

TradeStation is good and I am moving my futures trading there but options and futures have to be in two different accounts and the options on futures is a mroe complicated account (pit trading account) according to TS. I do not think it is a big deal but not as easy as IB where everything is just in one account and you trade it all. I just do not like IB. Will wait on ToS.

Phil

Quote from momoneythansens:

There's a not completely useless book that discusses credit spreads on futures options if you're interested:

http://www.amazon.com/exec/obidos/t...102-0526283-8510540?v=glance&s=books&n=507846

Does a decent job of covering the in's and out's of SPAN margining etc. The short version is that you get more bang for your buck. Didn't buy the book just flicked through it.

Unfortunately my broker doesn't yet support options on futures :(

Was going to ask Phil if we could tag team TOS into submission on this point but....am too lazy.

Will probably go with Tradestation or other eventually for this purpose.

Momoney.
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Quote from optioncoach:

The SPX giveth and the SPX taketh away. Boy am I glad I closed out my 555 XEOs cause the market was at 554. Of course it is now 545.55 lol.

Some people must be getting whipsawed like crazy!
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lol, I have some short 545 strikes that have been violated 3 times in 2 weeks now but I'm just letting it ride...all part of the fun :p

Not an approach recommended for people with anything but pure play money at risk, naturally.

Momoney.
 
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