SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
The reason I was asking because on the SPX, the IV skew for puts means you can go further OTM and still get similar IVs and help manage your risk somewhat. Since I will continue to sell spreads, on the put side I can even further OTM due to the skew to deal with potential large price swings in the SPX. With these spreads my biggest risk is market movement or delta. But with IV increasing it has me thinking of other ways to hedge to also profit from IV increases. Just thinking out loud....
Phil
Phil
I don't think it is out yet. Usually takes several hours before the CBOE posts the SET. Here is the link to see when the CBOE updates it.
http://www.cboe.com/data/Settlement.aspx
http://www.cboe.com/data/Settlement.aspx
Gater and I both SHOULD have covered our 1170 short on Mon/early tues when we could have gotten out at .90/1.00. I did try but didn't succeed in closing my put spread (on wed)..did close the call short for .05...sooooo my Oct spx trade +3.40 (less commissions)
Opened Nov 1150/1135 PS +2.10 (on tues)..Andy I wish I could say I learned a lesson..not real sure I did, however I learned a great deal from all of you who rolled and did B-fly adjustments (for possible future use)....lesson I need to learn..."when they start getting into your shorts...pull up your pants"
For the Oct record I actually placed more debt spreads than credit spreads and closed them out for may be half the potential profit. However I will continue to do otm spreads on the spx until it doesn't work. 2 credit spreads on stocks Qlgc which blew up (lost 80%of max)and Cree which saved the day this am..closed for sm profit..I'm thinking this volatility thing is on the money with stocks..going to avoid credit spreads on stocks, however I also think that the Refco fiasco actually did create a great deal of the volatility over the last few days. If oil stabilizes perhaps vol will come down. My guess and my bet is on an upswing in Nov. (in the mkt not in vol)
Opened Nov 1150/1135 PS +2.10 (on tues)..Andy I wish I could say I learned a lesson..not real sure I did, however I learned a great deal from all of you who rolled and did B-fly adjustments (for possible future use)....lesson I need to learn..."when they start getting into your shorts...pull up your pants"
For the Oct record I actually placed more debt spreads than credit spreads and closed them out for may be half the potential profit. However I will continue to do otm spreads on the spx until it doesn't work. 2 credit spreads on stocks Qlgc which blew up (lost 80%of max)and Cree which saved the day this am..closed for sm profit..I'm thinking this volatility thing is on the money with stocks..going to avoid credit spreads on stocks, however I also think that the Refco fiasco actually did create a great deal of the volatility over the last few days. If oil stabilizes perhaps vol will come down. My guess and my bet is on an upswing in Nov. (in the mkt not in vol)
The other thing I noticed as I watched the spx in the last 10 minutes of trading yesterday...is the amt of premium left on the table going into set. (1.25 for the 1170 P) As Murray pointed out in the last few days of trading there was still a great deal of premium on the table, so perhaps tightning up or shortning the time frame might be the way to go. or playing the set??? I wonder if that is what the mini spx will be doing. Is this day trading in options???
Quote from gatorplease:
OK, I agree that different people can use credit spreads in different ways. However, the spreads as proposed by optionscoach are not meant to be used as a daytrade.
SO, what do you propose to trade in todays environment. Up 20 points one day, down 20 the next. What direction are we going??? I sure don't know. And apparently half the people out there don't know, because we're going up and down, taking trading positions out left and right.
I'm sincerely interested in what you propose as a trade here.
lol. Well if you want to take advantage of the madness and rising volatility you could go long straddles, backspreads, diagonals or has been mentioned about a zillion times, calendars etc. They each have their own pros and cons, naturally.
I apologize if I came across as condescending for I surely am no expert. I was merely trying to point out that there are broadly two categories of people that trade this strategy:
A) Those that think the market is going sideways or trending and base strike selection largely on techincal analysis. They are mainly interested in holding till expiration and as long as short strikes are not violated will take the credit that comes along with it. They do not pay much attention to day to day paper losses/gains of their position and are not that bothered about rises and falls in IV as long as their shorts expire worthless.
B) Those that specifically construct the short vega credit spread in order to take advantage of a forecasted FALL in volatility and would look take profits early if that happens.
For the purposes of generalisation I have obviously simplified the description of the motivations for both groups and they are a bit of a caricature. The reality, as always is a bit more blurred.
Clearly those in group A can't be completely ignorant of volatility because if the underlying becomes too volatile their short positions are more likely to be in danger.
Conversely, those in group B can't be completely ignorant of direction of the underlying for the same reason but this can be mitigated by neutralising the delta and/or gamma exposure. However, I don't think those in group B are neccessarily day traders as you imply.
Anyone who has been trading this strategy over the last few months has probably been in group A whether they knew it or not. It has been a sideways market and hence one of several reasons for the success of Phil and others.
For the record I'm quite happy trading credit spreads even in this low IV environment which is why I'm on this forum despite the fact that I do not try and guess market direction and I have next to no faith in technical analysis! I do my utmost to trade without emotion.
Lastly, if it's not clear, I'm not a critic of this strategy. Hope I answered all of your questions I have a habit of rambling.
Momoney.
Quote from DonnaV:
Gater and I both SHOULD have covered our 1170 short on Mon/early tues when we could have gotten out at .90/1.00. I did try but didn't succeed in closing my put spread (on wed)..did close the call short for .05...sooooo my Oct spx trade +3.40 (less commissions)
Opened Nov 1150/1135 PS +2.10 (on tues)..Andy I wish I could say I learned a lesson..not real sure I did, however I learned a great deal from all of you who rolled and did B-fly adjustments (for possible future use)....lesson I need to learn..."when they start getting into your shorts...pull up your pants"
For the Oct record I actually placed more debt spreads than credit spreads and closed them out for may be half the potential profit. However I will continue to do otm spreads on the spx until it doesn't work. 2 credit spreads on stocks Qlgc which blew up (lost 80%of max)and Cree which saved the day this am..closed for sm profit..I'm thinking this volatility thing is on the money with stocks..going to avoid credit spreads on stocks, however I also think that the Refco fiasco actually did create a great deal of the volatility over the last few days. If oil stabilizes perhaps vol will come down. My guess and my bet is on an upswing in Nov. (in the mkt not in vol)
So are you using calendars? Or pure debit spreads on SPX?
Are you talking to me?
I'm doing just vertical's although I have a call (today if it gets filled) on the smh I'm thinking to diag. if my current call is correct, but not yet comfortable in calendars as it seems you have to be correct twice...I think I am in Momoney's category A.on spx debit spreads only...may be morphing (sp?) in IC
I also want to add that these positions are also somewhat direction besides focusing on volatility. I am making the non-directional bet that the market will not trade below X or trade above X by expiration. So the vol can increase and price swings can occur but I am still on my way to a profit if my price ranges are still intact. For example, the range of the SPX has increased but we are still in a certain range, although it has expanded.
That is what would lead me AWAY from IRON CONDORS as an opening position right now and I would only leg into them if conditions warranted. For now all I am looking at really are put spreads for NOV, deep OTM. But not today since it is an upday. I may look at calls once SET is finished for today but would be looking at around 1265 or so for more cushion.
Phil
That is what would lead me AWAY from IRON CONDORS as an opening position right now and I would only leg into them if conditions warranted. For now all I am looking at really are put spreads for NOV, deep OTM. But not today since it is an upday. I may look at calls once SET is finished for today but would be looking at around 1265 or so for more cushion.
Phil