SPX Credit Spread Trader

FOr those getting lost in the greeks, the SPX calls have a negative IV skew (call IV decreases as you go further OTM) unlike the wonderful puts that have a positive IV Skew. So with 24 days or so to expiration the deep OTM calls have little or no premium thanks to theta and negative skew. That is why you are fiding you cannot go past 1240 or 1245 for a decent premium but on the down side you can go to 1120 even. For now I am in a watching mode with only one put spread in place.

I would love to be in more positions before theta really kicks in but if I do not see something I like I have no problem waiting or missing NOV entirely. (DEC expiration is only 51 days away...., closing in on 45).

So for all those who are not in yet, do not feel you are missing out. For those who are getting in, just remember to to still be cautious and do not chase premium simply to be in the game.

Phil

Quote from riskarb:

Your competition is the steamroller bearing down on you when you're picking up those nickels. As Dr. Z suggested; there is huge edge-loss in selling those otm call spreads. Some of the cheapest gamma I've ever seen, therefore the most leveraged to gamma^2. Lov vols = cheap gamma. OTM = cheap gamma. Negative call skew = cheap gamma.

If the vol smile was flat you'd get nearly TWICE as much for your call spreads.

If you guys/gals are going to continue down this road... make every attempt to sell near-atm premium, or consider trading atm/otm condors and flies. If you continue to be led down the primrose path, then at the very least buy some term-structure vega in calendars.

No trade beats the expectancy argument[execution-edge], but as I've stated numerous times -- it's best to be long upside and short downside gamma -- long otm/short atm. This naturally structures the book in long flies and condors, either natural or synthetic[irons].

Your competition doesn't control the market; they know that the gamma you're selling them can't get any cheaper, therein lies their edge.

I've said my peace and I won't clutter this thread any further -- good luck.
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Thanks Phil...I will

Quote from optioncoach:

This actually gives you some flexibility for NOV since you can either sell a lower strike call for a credit spread or if a bigger move is expected sell a higher strike call for more than $0.55 for a risk-free trade. Keep your options open either way.

phil
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Quote from optioncoach:


So for all those who are not in yet, do not feel you are missing out. For those who are getting in, just remember to to still be cautious and do not chase premium simply to be in the game.

Phil
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That is the hardest part for me to overcome, the missing out feeling. I tried getting into the 1120/1130 put spread earlier but couldn't get filled. I am now telling myself to sit back and wait, maybe until tomorrow before making another stab at it as my emotions are trying to take over today.

ryan
 
Just turn the emotions to your benefit. You are not worried about the day to day fluctuations because you are not in any position. So you can just sit back and watch and wait for a good entry. You have to convince yourself that this is a long-term goal not a month to month race. For example, with a 24% return on margin for the year, I do not mind if I miss NOV entirely. If you only have a 3% return, you should still not mind if you miss NOV if no good entries presented themselves.

Patience is the key. I also go through the same emotions about not being in the market but I just try and remind myself that another entry point is just a few days away so no need to rush.

Phil

Quote from ryank:

That is the hardest part for me to overcome, the missing out feeling. I tried getting into the 1120/1130 put spread earlier but couldn't get filled. I am now telling myself to sit back and wait, maybe until tomorrow before making another stab at it as my emotions are trying to take over today.

ryan
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Go to www.cboe.com and they have the information on the weeklys. I think they come out this Friday?

phil

Quote from osho67:

Thanks Optioncoach for clarifying the xsp product. Do you know what will be the ticker symbols for weeklys? Thanks
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Phil,

Reminds me of sailing..... always chasing the wind... and when we get there.... it's gone!

Thanks for the words of caution... they too are now permanently copied into my trading plan log book.

Do you think I should ask for copywrite privileges considering the amount of information I've copied?

~ ~ _/) ~









Quote from optioncoach:

FOr those getting lost in the greeks, the SPX calls have a negative IV skew (call IV decreases as you go further OTM) unlike the wonderful puts that have a positive IV Skew. So with 24 days or so to expiration the deep OTM calls have little or no premium thanks to theta and negative skew. That is why you are finding you cannot go past 1240 or 1245 for a decent premium but on the down side you can go to 1120 even. For now I am in a watching mode with only one put spread in place.

I would love to be in more positions before theta really kicks in but if I do not see something I like I have no problem waiting or missing NOV entirely. (DEC expiration is only 51 days away...., closing in on 45).

So for all those who are not in yet, do not feel you are missing out. For those who are getting in, just remember to to still be cautious and do not chase premium simply to be in the game.

Phil
More...
 
Actually I like your wind analogy better. Basically instead of chasing the wind and expending all that energy, just open the sails and wait as another breeze will be coming along shortly to carry your boat.

Did Hurrucane Chasers get pissed when they missed Emily in July? They just decided to wait assuming that another one would come again soon. Unfortunately they were rewarded for their patience ;)

Quote from Sailing:

Phil,

Reminds me of sailing..... always chasing the wind... and when we get there.... it's gone!

Thanks for the words of caution... they too are now permanently copied into my trading plan log book.

Do you think I should ask for copywrite privileges considering the amount of information I've copied?

~ ~ _/) ~
More...
 
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