Isn't this more or less a covered call? Why not just buy the put...
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Isn't this more or less a covered call? Why not just buy the put...
Would love to know how you went from covered call to buying a put lol. This specific example is like a diagonal bull call spread really.
The strikes do not match up because of the nature of the XSP and weekly strikes but the idea is to do a diagonal or calendar spread (if strikes are the same) and be able to make adjustments each week selling the weeklies against the XSP but have it be a covered spread so there is no margin. Also, could you adjust each week by adding or subtracting XSPs to adjust deltas if you were so inclined while selling weeklies as well?
Phil
The strikes do not match up because of the nature of the XSP and weekly strikes but the idea is to do a diagonal or calendar spread (if strikes are the same) and be able to make adjustments each week selling the weeklies against the XSP but have it be a covered spread so there is no margin. Also, could you adjust each week by adding or subtracting XSPs to adjust deltas if you were so inclined while selling weeklies as well?
Phil
Brain fart.
You're quite correct. I meant sell the put...It just doesn't seem that attractive to me with a diagonal of only 5 pts That's one day's chump change of late. Because of that, it really looks like a covered call to me -- although I acknowledge that strictly speaking you are 5 pts off.
Also, you don't have 60-100 pt ranges and a month of time to adjust over. But I haven't put pencil to paper to calc the weekly range and volatility. So, I am just offering a thought.
I have not worked it out yet either, just put the numbers on paper to see what the pricing would be and if it is different then the position I put on now with the SPX and weeklies. Just curious since once could adjust the position buying or selling XSPs as the market moved.
Another option is to buy the XSPs for hedges and sell a smaller amount of weeklies to partially finance the insurance. Maybe buy 40 XSPs and sell 2 weeklies slightly OTM. Just thinking out loud.
Phil
Another option is to buy the XSPs for hedges and sell a smaller amount of weeklies to partially finance the insurance. Maybe buy 40 XSPs and sell 2 weeklies slightly OTM. Just thinking out loud.
Phil
Quote from ssternlight:
Brain fart.
It just doesn't seem that attractive to me. But I haven't put pencil to paper to calc it out...
Well, I can see a motivation as the initial experiment took a second move against it today and something like what you are suggesting with the XSP's as a repair strategy for that spread might have worked well.
FWIW, it seems to me that RiskArb's repair strategy is to partially hedge his binary positions early on if he see's it beginning to get away.
Having said that, I think these weeklies might need a lot of attention as the strikes are basically ATM and there is a lot of volatility out there.
Phil,
I went the other way, long SPX 1205C, short weekly 1205C. With the low volume, didn't find much willingness to negotiate between the b/a. Have you found this?
That may be a big issue as try to close out shortposition at end of week, if desired.
Gator
I went the other way, long SPX 1205C, short weekly 1205C. With the low volume, didn't find much willingness to negotiate between the b/a. Have you found this?
That may be a big issue as try to close out shortposition at end of week, if desired.
Gator
I think I would still prefer the XSP for hedging since I want expiration to be the same length as the actual SPX I am looking to hedge. The idea really is perhaps to sell 1 or two weeklies to offset some of the hedge cost but still allow for significant profits if the index moves against us.
For example I bought 25 XSP at 117 as a partial hedge for my 1150/1160 (you should have known we were gonna rally once I bought those hedges!- best contrarian indicator out there). But looking back, what if I sold one weekly (assuming strikes were available) to partially offset but still have postive delta position.
I do not have that now but will look into it next time I need to add a partial hedge.
The other position I have, long SPX 1185 put and short weekly 1185 put is to see if I can squeeze more profit playing the swings in the swings in the market and using a few weeklies to sell against the long option. With an upward bias going into the end of the year, I may look into OTM calls for December.
Phil
For example I bought 25 XSP at 117 as a partial hedge for my 1150/1160 (you should have known we were gonna rally once I bought those hedges!- best contrarian indicator out there). But looking back, what if I sold one weekly (assuming strikes were available) to partially offset but still have postive delta position.
I do not have that now but will look into it next time I need to add a partial hedge.
The other position I have, long SPX 1185 put and short weekly 1185 put is to see if I can squeeze more profit playing the swings in the swings in the market and using a few weeklies to sell against the long option. With an upward bias going into the end of the year, I may look into OTM calls for December.
Phil
I had to call Chicago to get an answer....drum roll please.
They're working on it. No ETA (maybe this week).
Quote from ssternlight:
I had to call Chicago to get an answer....drum roll please.
They're working on it. No ETA (maybe this week).
Yeah that's what they said.
Dear Trader,
As it stands right now the Beta version and older TWS versions,
not the current stand-alone, or current browser, will function properly
for the new weekly options. As the system is updated beta to
browser to stand-alone all TWS systems will function properly with
the new weekly options. IB apologizes for any inconvenience
that this may have caused you in this case.
Regards,
John W
IB Customer Service
This is the response that I got from them. Just have to wait and see then.