SPX Credit Spread Trader

[yellowjacket]

rdemyan:

Yes, I'm thinking of the actual iv for each strike calculated. Of course, you'd have to make some estimate, but it seems possible if done in excel. For example, the short put has a lower iv and the long put a higher iv relative to each other when the spread is initially placed. If an adjustment is necessary (assume a debit adjustment with the underlying falling in price), the relative difference in iv between the 2 options might change making the predicted spread price not so obvious. It seems like the price of the spread could be influenced by 2 factors: the iv curve or skew will be shifted upward (underlying has fallen), so that iv at all strikes is higher, but also now you will BTC the short put (the position with the relatively lower vol) and STC the long put (the position with the relatively higher vol).

Quote from rdemyan:

The only skew I know about is the skew in volatility for puts relative to calls. Are you talking about using the actual implied volatility for each different option? The curves did use a constant volatility for each option that was just assumed at 15% for the first graph and 20% for the second.

 

[rdemyan]

Yellowjacket:

I think the effect of this should be taken into account. I just PM'd you to discuss how I might do this.

Thanks.

Quote from yellowjacket:

rdemyan:

Yes, I'm thinking of the actual iv for each strike calculated. Of course, you'd have to make some estimate, but it seems possible if done in excel. For example, the short put has a lower iv and the long put a higher iv relative to each other when the spread is initially placed. If an adjustment is necessary (assume a debit adjustment with the underlying falling in price), the relative difference in iv between the 2 options might change making the predicted spread price not so obvious. It seems like the price of the spread could be influenced by 2 factors: the iv curve or skew will be shifted upward (underlying has fallen), so that iv at all strikes is higher, but also now you will BTC the short put (the position with the relatively lower vol) and STC the long put (the position with the relatively higher vol).

 

[ryank]

I rolled down my calls several times to bank profits as the market fell. I was forced (per my trading plan) to roll my puts down one time (for a loss) but all worked out well. I ended the month with a 9.9% gain after commissions (OX really loved me this month lol).

ryan

 

[gatorplease]

I am fascinated with those of you who chose to roll spreads down as the market fell. My personal approach has always been not to roll, but leave the positions alone.

I've been whipsawed too many times where the market goes up, hits the call danger area, then drops dramatically and hits the put side danger area.

How do you manage this risk. Obviously you have a much better sense of market movement than I do. So if any of you can discuss the management of this, I'd appreciate it.

Thanks,

Gator

 

[GATrader]

That is what I failed to do this exp cycle, failed to do any offensive action which is call roll down and did too much defensive put rolldown. Live and learn

 

[ryank]

My initial call spread was 1280/1290 so with the big drop in the market I was able to roll down and still keep a pretty big cushion between the SPX and my short strike. These gains help to offset my loss when I rolled down the puts and I was well in the black for the month.

ryan

Quote from gatorplease:

I am fascinated with those of you who chose to roll spreads down as the market fell. My personal approach has always been not to roll, but leave the positions alone.

I've been whipsawed too many times where the market goes up, hits the call danger area, then drops dramatically and hits the put side danger area.

How do you manage this risk. Obviously you have a much better sense of market movement than I do. So if any of you can discuss the management of this, I'd appreciate it.

Thanks,

Gator

 

[El OchoCinco]

Well this month was not my best for sure, I have benn coming in at 3 - 5% per month over the year. But it was my one little mistake that cost me some profits this month and I was still positive despite it so I am pleased. Not pleased with the mistake though (getting greedy on the XEO calls and rolling them down too close).

With returns to date I am not looking to go too big for the last two months of the year. I will probably add some deep OTM puts to ride the potential end of year rallies into Thanksgiving and X-mas. I am shooting for 30% by year end.

Phil

Quote from riskarb:

OMG... I had no idea of the magnitude. :eek:

Good luck guys.

 

[rdemyan]

I tell you I'm getting fed up with OX fills. While they seem to do fairly well on the bull put side, getting my bear calls filled is always difficult. Today I tried to get the following filled:

Nov 1240/1250 at $0.55 (this was after starting at about $0.65)

b/a was around $0.45 to $0.8

At one point the b/a was at $0.55 to $0.9 and I still did not get filled. Ultimately I got filled at $0.50.

I'm going to look into ToS and will probably move some money over there.

I know that ToS has trading software that you have to download. Is it possible to still trade online without downloading this software. When I'm onsite at my client, they will not allow downloads on their computers and I can't hook my own laptop up to their network.

Also, when people call in to try and get their order filled, do you still get charged the online commission or is it now broker-assisted.

 

[El OchoCinco]

I like ToS in that they seem more willing to work with you in getting good fills (i.e. calling in for a good fill has worked for other people). Also I think they allow you to log into their website to place trades and monitor your account so when you are away from your own computer and cannot download the platform at a client's site you can still access it if you can simply go online.

Call ToS and I guarantee they will trip over themselves to help you and get your business as they have been so willing to help out with me and others who have switched over there. If you call, tell them Coach Phil referred you (I do not get anything for the referral, I just have developed a good relationship with some of the principals there and it could not hurt...)

Phil

Quote from rdemyan:

I tell you I'm getting fed up with OX fills. While they seem to do fairly well on the bull put side, getting my bear calls filled is always difficult. Today I tried to get the following filled:

Nov 1240/1250 at $0.55

b/a was around $0.45 to $0.8

At one point the b/a was at $0.55 to $0.9 and I still did not get filled. Ultimately I got filled at $0.50.

I'm going to look into ToS and will probably move some money over there.

I know that ToS has trading software that you have to download. Is it possible to still trade online without downloading this software. When I'm onsite at my client, they will not allow downloads on their computers and I can't hook my own laptop up to their network.

Also, when people call in to try and get their order filled, do you still get charged the online commission or is it now broker-assisted.

 

[rdemyan]

Alright!!

I just called ToS and talked with the guys there. Scott Sheridan made me a deal on commissions, because I told him that OX gives me a great deal.

I asked him if I could post my deal in this forum and he said yes. Sounds like he will be willing to give the same deal to others who open an account (but you have to check with him).

So here it is.

$1.25 per options contract with a $12.95 minimum. The minimum for a credit spread is $19.95

So, I typically trade 10 credit spreads. This is considered to be 20 contracts at a cost of $25.00!! This is what I currently pay at OX. However, if you only trade 1 spread you'll pay $19.95.

If you are interested, go to the ToS website to get the phone number and ask to speak with Scott.

One other point. He said (and I hope that this will indeed be true), that I will still pay the same discount rate even if I call into the desk to get my SPX credit spread order spurred along. This is very important to me.

Thanks, Coach.

Quote from optioncoach:

I like ToS in that they seem more willing to work with you in getting good fills (i.e. calling in for a good fill has worked for other people). Also I think they allow you to log into their website to place trades and monitor your account so when you are away from your own computer and cannot download the platform at a client's site you can still access it if you can simply go online.

Call ToS and I guarantee they will trip over themselves to help you and get your business as they have been so willing to help out with me and others who have switched over there. If you call, tell them Coach Phil referred you (I do not get anything for the referral, I just have developed a good relationship with some of the principals there and it could not hurt...)

Phil