That is quite a nice profit and even if the market stays below 1200, you might still be thankful about not worrying about the strng rally that could still occur.
Phil
Phil
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Phil
I've adopted the policy of waiting to put on any credit spreads till 3 weeks before expiration. I can still get my 4-5% credit, still go OTM 40-50pts deep, and have time (or lack of it) to really in my favor. I like Donna's idea of putting on a put spread and then buying 1/2 of the call spread and then see which way the market goes. I may experiment with that on paper. Good trading to everyone.
Hootie
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 [/B][/QUOTE]
I've adopted the policy of waiting to put on any credit spreads till 3 weeks before expiration. I can still get my 4-5% credit, still go OTM 40-50pts deep, and have time (or lack of it) to really in my favor. I like Donna's idea of putting on a put spread and then buying 1/2 of the call spread and then see which way the market goes. I may experiment with that on paper. Good trading to everyone.
Hootie
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 [/B][/QUOTE]
This time I put on 1/2 the number of call spreads as put spreads.
(unbalanced iron condor). 1 call spread for every 2 put spreads. (Unlike Donna who has 1/2 of the call spread open - good idea also).
If the market moves up: I will buy an unbalanced butterfly to roll up, thus selling twice the number of call spreads as what I buy back (resulting in a little more credit).
So the final position will be equal number of call and put spreads.
This gives more of a cushion to roll higher again, or close the call spread position.
If the market moves down: the call spreads already opened can be bought back for less. Or rolled down (sell unbalanced butterfly) for some more credit. Gives a cushion to roll down or close put spreads.
I am just experimenting and learing with very few contracts.
(unbalanced iron condor). 1 call spread for every 2 put spreads. (Unlike Donna who has 1/2 of the call spread open - good idea also).
If the market moves up: I will buy an unbalanced butterfly to roll up, thus selling twice the number of call spreads as what I buy back (resulting in a little more credit).
So the final position will be equal number of call and put spreads.
This gives more of a cushion to roll higher again, or close the call spread position.
If the market moves down: the call spreads already opened can be bought back for less. Or rolled down (sell unbalanced butterfly) for some more credit. Gives a cushion to roll down or close put spreads.
I am just experimenting and learing with very few contracts.
I am new to this thread but I can tell you this is great. I am a stock investor I started trading option last July; I was doing it like a fool just to learn. I paid a big price for that lesson.
I have traded covered call last two months and last month I read about Credit Spread and I think if, well used, is a terrific strategy.
If I found this thread a 2 weeks ago I would not have lost my 3k in SPX.
I trade SPX OEX and NDX
The only thing I was missing is patience and discipline.
Last Weekend I developped the Statistical software for Credit Spread and I am going to follow it for result. From now on I will trade at or below the 4SDs. Every week, Iwill take a set of data and do my things with it.
For this week My 4SDS intervals are: 1124.5 and 1271
So for BPS if the shortt strike is at 1125-1130, you should be safe
and I will wait for the market to move up and do my BCS at around 1260-1270 strikes
My entry is based on Statistical and technical analysis.
I will post more on my fills.
Piccon
I have traded covered call last two months and last month I read about Credit Spread and I think if, well used, is a terrific strategy.
If I found this thread a 2 weeks ago I would not have lost my 3k in SPX.
I trade SPX OEX and NDX
The only thing I was missing is patience and discipline.
Last Weekend I developped the Statistical software for Credit Spread and I am going to follow it for result. From now on I will trade at or below the 4SDs. Every week, Iwill take a set of data and do my things with it.
For this week My 4SDS intervals are: 1124.5 and 1271
So for BPS if the shortt strike is at 1125-1130, you should be safe
and I will wait for the market to move up and do my BCS at around 1260-1270 strikes
My entry is based on Statistical and technical analysis.
I will post more on my fills.
Piccon
Welcome. If you are new to options AND this strategy then I strongly urge caution and restraint. This is not necessarily the best strategy to get into after starting out in options. So if you choose to do it, start with a SMALL portion of your capital and SMALL number of contracts. Your focus on 4 sigma strikes certainly is quite conservative but it still depends on what volatility input you are using.
Feel free to join in on the conversations and ask questions but please tread slowly.
Phil
Feel free to join in on the conversations and ask questions but please tread slowly.
Phil
Coach:
As you know I just opened a ToS account. They have a feature call 'ThinkSpreads' which I believe lists all of the spread trades currently submitted within ToS. This is very interesting to peruse and I found one, in particular, that interested me.
BTO 10 Jun 2007 1100 Puts
STO 10 Jun 2007 1150 Puts
Credit asked for is $25 and trade is GTC. but ToS is showing the 'Marked', which I guess is the difference between the last fills on each individual option as $14.20.
I wonder why someone would place such a trade. The margin would be $50,000 with a potential $25,000 profit, but that would be over about 20 or so months (if filled by November, which is highly unlikely and if held to expiration).
As you know I just opened a ToS account. They have a feature call 'ThinkSpreads' which I believe lists all of the spread trades currently submitted within ToS. This is very interesting to peruse and I found one, in particular, that interested me.
BTO 10 Jun 2007 1100 Puts
STO 10 Jun 2007 1150 Puts
Credit asked for is $25 and trade is GTC. but ToS is showing the 'Marked', which I guess is the difference between the last fills on each individual option as $14.20.
I wonder why someone would place such a trade. The margin would be $50,000 with a potential $25,000 profit, but that would be over about 20 or so months (if filled by November, which is highly unlikely and if held to expiration).
It could be an IRA trade where the person really is not concerned with the timing and therefore is willing to let a 100% profit mature over 2 years or so with a strongly bullish bias Also, if the market is back to 1250 and beyond by next Spring then the spread might have a 30 or 40% profit.
As for the way off limit given the current spread value, it could be an order put to sit and hopefully fill on another large dip day. Maybe when the market got near 1175 it was at that price and the spread order was placed after the large run up looking to get filled on the next large dip.
Also even if the market dipped below 1150, the options are European and the person can sit and do nothing easily. The person expects the market to be ABOVE 1150 BY JAN 2007 so bounces and dips below 1150 before then might not concern the person at all. Moreover the breakeven is 1125 which means a dip to 1140 will not cause the investor worry, especially if there is still a year or so to expiration.
Phil
As for the way off limit given the current spread value, it could be an order put to sit and hopefully fill on another large dip day. Maybe when the market got near 1175 it was at that price and the spread order was placed after the large run up looking to get filled on the next large dip.
Also even if the market dipped below 1150, the options are European and the person can sit and do nothing easily. The person expects the market to be ABOVE 1150 BY JAN 2007 so bounces and dips below 1150 before then might not concern the person at all. Moreover the breakeven is 1125 which means a dip to 1140 will not cause the investor worry, especially if there is still a year or so to expiration.
Phil
Today I bought the Nov 1240/1250 spread for a debit of .50
Risking .50 to make 10.00 Not bad if we get a good rally this cycle.
If we get any strong moves down I will sell a WOTM put spread to recover my .50 Also I'll make whatever profitable adjustments that present themselves along the way.
Risking .50 to make 10.00 Not bad if we get a good rally this cycle.
If we get any strong moves down I will sell a WOTM put spread to recover my .50 Also I'll make whatever profitable adjustments that present themselves along the way.
Just to clarify that it is risking $0.50 to make $9.50 
. Also realize that if you sell a 10 point deep OTM put spread to recover your $0.50 debit cost, you are now risking $10.00 to make $10.00.
Phil
. Also realize that if you sell a 10 point deep OTM put spread to recover your $0.50 debit cost, you are now risking $10.00 to make $10.00. Phil
Of course you are right about that coach. Just rounding errors.Quote from optioncoach:
Just to clarify that it is risking $0.50 to make $9.50
Phil
