SPX Credit Spread Trader

[smilingsynic]

Quote from optioncoach:

Well calendars and credit spreads both have limited risks so there not a catastrophe with either strategy per se. What matters is how much risk you put in the position. Someone doing 10 credit spreads could have less risk than someone doing 50 calendars.

That is why with any position you cannot put 100% of your capital or a significant amount where one loss can wipe out most if not all of your capital.

Yes, both do have limited risk, but in a market with rising volatility, one would be less likely to lose the entire amount risked with a calendar spread than one would with a credit spread. Credit spreads are neg vega and positive theta; calendars are positive vega and positive theta.

Of course, a move of overwhelming size would turn either of the two into toast.

 

[El OchoCinco]

The last two days would have been wonderful calendar days lol.

Quote from smilingsynic:

Yes, both do have limited risk, but in a market with rising volatility, one would be less likely to lose the entire amount risked with a calendar spread than one would with a credit spread. Credit spreads are neg vega and positive theta; calendars are positive vega and positive theta.

Of course, a move of overwhelming size would turn either of the two into toast.

 

[smilingsynic]

Quote from andysmith:

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.

I wasn't thinking clearly when I wrote that.

Calendars have an advantage over credit spreads in times of rising volatility, and rising volatility often precedes catastrophic market drops (but not always).

I'll put it this way, if one MUST sell theta now that the market's volatility is rising, I would suggest the calendar over the credit spread.

Or, even a combination calendar/credit spread. Buy a otm longer term option and sell a closer to atm near-term option (for instance, buying a Nov 120 put and selling an Oct 119 put).

 

[riskarb]

Quote from smilingsynic:

I'll put it this way, if one MUST sell theta now that the market's volatility is rising, I would suggest the calendar over the credit spread.

Or, even a combination calendar/credit spread. Buy a otm longer term option and sell a closer to atm near-term option (for instance, buying a Nov 120 put and selling an Oct 119 put).

How is that selling theta? You're long theta in the Oct119p/Nov120p diagonal. Are the options in this example itm or otm? It wouldn't make much sense to trade an ITM put calendar/the otm same-strike call calendar due to slippage/liquidity.

As an example... the SPX Oct1175p/Nov1180p spread is trading 18 handles, and the Nov 1180p[$20.50] is not decaying > the credit rec'd on the Oct 1175 put bid at $2.50.

 

[nlslax]

Quote from Sailing:
Today, at noon, the same spread was midpointed around .80. I got busy at work.. and didn't make an offer. At 3:30pm the same spread was B/A .2 / 3.40 I could not believe it...
I did place and received a fill for $1.30


Murray,
Congrats on the fill at $1.30. I'm curious, if the b/a was .2/3.4, why did you choose $1.30 as your credit limit when the midpoint appears to be $1.80?
Thanks.

 

[andysmith]

MoMoney, Thanks for the link -- I have Summa's book.

Please call TOS and ask for ES options. You'll be one of several who have (incl. me) and they just might do it.

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.

 

[andysmith]

Phil,

Ask TOS again for ONLY options on ES (rather than the whole universe of futures options). I believe they are considering it since they already have ES futures -- IMHO serious possibility they might add ES options.

I have found that it is MUCH easier to trade with just one account and one platform, especially when the market gets tricky....

Quote from optioncoach:

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

 

[andysmith]

PHIL,

I agree, &*&#%& October, what the $*%^ was all these expiration games about?

We're both short 1165. Think SET will dive below that?

Quote from optioncoach:

And we are done....... #$%@ you very much October lol. I will post final returns on the SPX positions tomorrow after SET. I am pretty far on both sides so I am not worry about SET tomorrow (even a 10 point swing will not hit my short strikes). XEO will take one more day. Hope you all did well for OCT SPX.

After I post my results I would be interested in yours for those willing to share, both good and bad. As I said earlier I may have a small loss in OCT (there goes 6 month streak) but I do not mind at all since I worked to preserve my capital and I already have a large cushion. Will update tomorrow.

Phil

 

[El OchoCinco]

I have asked a few times and have had conversations with the President and one of the founders and they did tell me they would love it but down the line. Hopefully they are moving more to do it and will chat with the President again next week.

Phil

Quote from andysmith:

Phil,

Ask TOS again for ONLY options on ES (rather than the whole universe of options). I believe they are considering it since they already have ES futures -- IMHO serious possibility they might add ES options.

I have found that it is MUCH easier to trade with just one account and one platform, especially when the market gets tricky....

 

[El OchoCinco]

No I doubt the SET will be below 1165 with the market at 1177. I do not see a 12 point SET tomorrow on a non-witching day.

Phil

Quote from andysmith:

PHIL,

I agree, &*&#%& October, what the $*%^ was all these expiration games about?

We're both short 1165. Think SET will dive below that?