SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Now, I see the problem. If the market goes up next week, I have to buy back the weekly and while the regular November will go up as well, the difference has to be more than 3.5 and won't offer much if any protection for the put spread. I wish I had figured this out before, but it is only money.
Chip
Chip
Yesterday I closed out my 1240/1250 call spread for a loss (the stong moves up spooked me, a little patience would have lowered my loss quite a bit, but what's done is done). I was able to close my 1115/1125 put spread for a .40 profit. I tried to roll up to 1165/1175 but couldn't get filled late in the day. So, I am going into the weekend with no open positions because I couldn't get the fills I was looking for. I would have liked the 2 days of theta to work for me but now I will be reevaluating everything and see where I want to be on the put and call sides before expiraton. Did anybody else get out of their 1240/1250 call spread or am I the only chicken?
ryan
ryan
I posted earlier that I got out on Monday of this week.
I too have been looking to try to get some more premium, but nothing meets my criteria. So, I think I'm just going to start looking at December.
We both should have gotten out last week, when the market was down. I think I learned from that in that I placed a trade counter to what the 'pros' recommended (because Nov is typically an up month). So when the trade made me a little money, I should have gotten out.
I'm trying to resist 'woulda, shoulda, coulda' and 'hindsight is 20/20'; but in this case there was enough recommendations and warnings, ahead of time, that getting out last week was the right thing to do.
Okay, I'll remember that when November comes around again.
EDIT: Also, I think Donna played it the smart way. She put herself in a position to profit if the market did what it typically does in November. If for some reason this November was different, she had a number of possible adjustments to select from (per her post today).
I too have been looking to try to get some more premium, but nothing meets my criteria. So, I think I'm just going to start looking at December.
We both should have gotten out last week, when the market was down. I think I learned from that in that I placed a trade counter to what the 'pros' recommended (because Nov is typically an up month). So when the trade made me a little money, I should have gotten out.
I'm trying to resist 'woulda, shoulda, coulda' and 'hindsight is 20/20'; but in this case there was enough recommendations and warnings, ahead of time, that getting out last week was the right thing to do.
Okay, I'll remember that when November comes around again.
EDIT: Also, I think Donna played it the smart way. She put herself in a position to profit if the market did what it typically does in November. If for some reason this November was different, she had a number of possible adjustments to select from (per her post today).
Coach:
What about initiating the spread positions a little differently. Place the long position first, wait to see how the market moves and then let it ride if it goes your way or adjust to a credit spread.
I guess if the market moves against you, you could adjust to a credit spread at a lower overall credit (compared to if you had done this when the long was first placed). But the bigger issue might be tying up significant margin in a credit spread that produced very little credit (or perhaps even a debit, if the market moved strongly against the initial long).
Still, I wonder if people use this type of strategy.
What about initiating the spread positions a little differently. Place the long position first, wait to see how the market moves and then let it ride if it goes your way or adjust to a credit spread.
I guess if the market moves against you, you could adjust to a credit spread at a lower overall credit (compared to if you had done this when the long was first placed). But the bigger issue might be tying up significant margin in a credit spread that produced very little credit (or perhaps even a debit, if the market moved strongly against the initial long).
Still, I wonder if people use this type of strategy.
Sometimes I think the more complicated you make things the more complicated it is (deep huh). You could certainly try legging into spreads every month by buying the long options and waiting for a move in your direction to either take profit or leg into a higher credit spread. You will certainly spend a lot of time trying to time the market and may get whipsawed in and out of positions as well as have a few months of profit.
I prefer the set and forget approach of the spreads. However if you follow the SPX long enough you might recognize trends and wish to play a price swing or two by going long the OTM option. I do not want to because I really do not want to go long 150 SPX Calls and watch the market tank and lose all that premium praying it will recover to make it back.
However in addition to your spreads, you can certainly take advantage of the Mini-SPX and place some long calls or puts for directional bets and then adjust into spreads or simply take profits.
I have been studying historical charts of SPX (even when making money your study and research should never end) and think I might begin looking to play some of the patterns and moves for extra profits using the XSP and weeklies. As for as the credit spreads I still would rather place the spread then try and time it by legging in.
But as many of you are realizing this strategy is limited only by your imagination. You are free to take the products and market moves and adpat them in any way your mind and capital allows you. So I can only tell you what I prefer but never really tell you what is right or wrong. I think all these approaches are perhaps valid as long as risk management principles are applied and you avoid really trying to get cute and time the market exactly at each price swing.
Phil
I prefer the set and forget approach of the spreads. However if you follow the SPX long enough you might recognize trends and wish to play a price swing or two by going long the OTM option. I do not want to because I really do not want to go long 150 SPX Calls and watch the market tank and lose all that premium praying it will recover to make it back.
However in addition to your spreads, you can certainly take advantage of the Mini-SPX and place some long calls or puts for directional bets and then adjust into spreads or simply take profits.
I have been studying historical charts of SPX (even when making money your study and research should never end) and think I might begin looking to play some of the patterns and moves for extra profits using the XSP and weeklies. As for as the credit spreads I still would rather place the spread then try and time it by legging in.
But as many of you are realizing this strategy is limited only by your imagination. You are free to take the products and market moves and adpat them in any way your mind and capital allows you. So I can only tell you what I prefer but never really tell you what is right or wrong. I think all these approaches are perhaps valid as long as risk management principles are applied and you avoid really trying to get cute and time the market exactly at each price swing.
Phil
It is all part of the learning process. The key to any strategy like this is to get to know the uinderlying INTIMATELY. If you are trading spreads on the S&P then you need to learn everything you can about it, including seasonal movements (although one cannot guarantee the market will always move the same each time of the year, it is usually more likely than not). Although 1240 still might not get touched in 2 weeks, I was still wary about entering any call spreads after OCT ended given the potential for a NOV surge. The more you trade the SPX, the more you will get a feel for analyzing it and looking at strikes.
One thing I constantly do is look at an annual chart of the SPX and add trendlines and fibonacci retracements to get a sense of support and resistance points, as well as look into falgs, pennants, triangles, wedges, H&S and other consolidation points.
Does it make my trading risk-free? No but it gives as much of an edge as possible when trying to select strikes and looking at what strikes I would not feel comfortable doing. I need as much information as possible in order to place strikes at points that put the odds in my favor as much as possible.
Limited losses are only damaging if learn nothing from them. You may feel bad about jumping ship but listening to your instincts at times is the only protection you have. If the market stays below 1240 it is easy to second-guess yourself but the one time you second-guess yourself and talk yourself out of taking protective measures is when you can lose a lot of money. Better to take some small losses and protect your capital than to constantly doubt and guess and get wiped out.
I am constantly learning and improving my trading abilities. That was the main reason I started this journal was to learn through the process of feedback and varying viewpoints. Some questioned my motives for doing this journal and there were clearly some selfish reasons- I wanted to learn from the exchange and discussions. For that I thank all of you. I have been trading for some time now and I feel I learn more each year and without a doubt I am a better trader now than I was in May and I will be even better next year and the year after. Whenever I feel I have learned all I need to know, is the time I will probably get wiped out lol.
Phil
One thing I constantly do is look at an annual chart of the SPX and add trendlines and fibonacci retracements to get a sense of support and resistance points, as well as look into falgs, pennants, triangles, wedges, H&S and other consolidation points.
Does it make my trading risk-free? No but it gives as much of an edge as possible when trying to select strikes and looking at what strikes I would not feel comfortable doing. I need as much information as possible in order to place strikes at points that put the odds in my favor as much as possible.
Limited losses are only damaging if learn nothing from them. You may feel bad about jumping ship but listening to your instincts at times is the only protection you have. If the market stays below 1240 it is easy to second-guess yourself but the one time you second-guess yourself and talk yourself out of taking protective measures is when you can lose a lot of money. Better to take some small losses and protect your capital than to constantly doubt and guess and get wiped out.
I am constantly learning and improving my trading abilities. That was the main reason I started this journal was to learn through the process of feedback and varying viewpoints. Some questioned my motives for doing this journal and there were clearly some selfish reasons- I wanted to learn from the exchange and discussions. For that I thank all of you. I have been trading for some time now and I feel I learn more each year and without a doubt I am a better trader now than I was in May and I will be even better next year and the year after. Whenever I feel I have learned all I need to know, is the time I will probably get wiped out lol.
Phil
Coach,
Do you remember my Credit Spread NDX 1650/1665. Now is the moment of truth. NDX closed at 1628
I just checked and 1635 is 52 wk high. Here what I would like to do; let me know what you think:
1) Buy DEC 1640 Call ( eventually it will bust the 52wk high).
2) Buy DEC 1640 Put ( It should retrace before attacking 52Wk)
Scenarios:
a) It goes down:
I will make money on the DEC PUT and my spreads NOV 1650/1665 and I will use the DEC 1640 CALL for a spread later or make money on it when it goes back up.
b) It goes up I will make money on the DEC CALL that will help cover potential loss on the Spreads; I will wait for any retracement to get some money on the PUT
I don't like to buy PUT or CALL on the same expiration month. They decay too fast. that's why I go DEC.
What do you think?
Do you remember my Credit Spread NDX 1650/1665. Now is the moment of truth. NDX closed at 1628
I just checked and 1635 is 52 wk high. Here what I would like to do; let me know what you think:
1) Buy DEC 1640 Call ( eventually it will bust the 52wk high).
2) Buy DEC 1640 Put ( It should retrace before attacking 52Wk)
Scenarios:
a) It goes down:
I will make money on the DEC PUT and my spreads NOV 1650/1665 and I will use the DEC 1640 CALL for a spread later or make money on it when it goes back up.
b) It goes up I will make money on the DEC CALL that will help cover potential loss on the Spreads; I will wait for any retracement to get some money on the PUT
I don't like to buy PUT or CALL on the same expiration month. They decay too fast. that's why I go DEC.
What do you think?
Yes XSP is the CBOE's version of the SPY but the b/a spreads are quite tight like the SPY but the XSP is European settled as it is a cash index and matches exactly with the SPX I am trading. The SPY is a tracking stock, and not an actual index value so it does not match exactly the S&P. I also found that for same strikes the SPY is perhaps $0.10 more expensive at times. I do not think the competition factor keeps me from using the XSP in the future. Compare price quotes on the two to see.
Phil
Phil