You are certainly entitled to do a happy dance! $10 grand minus my cut is certainly a great take 
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
I'm missing something here obviously. I thought the SET was the opening price of the SPX on Friday. How could it be higher than the high of the day?
Some problems are that if you do 10 different spreads you might be getting like $400 for each spread. Over two weeks with theta and market swings you could do worse trying to grab puts with the market running away from you and chasing the premium to higher strikes. Since the $100,000 will still be invested in the same position ultimately, there is no clear advantage of legging in 10 spreads at a time or just doing 100 40 days out. I think it is hard to define ahead of time how you are going to go in. Legging in might raise your overall average entry or it might lower it. In the end you might average out to what you initial were trying to get over the long haul. Maybe not, I have not tested it but I prefer to commit to the spread when I have time to get the premium and can always add later since I always keep margin in reserve.
The SET is based on the opening prices of all 500 stocks. If stocks open at different times throughout the morning on gap ups then it could skew the gap higher. The SPX takes all 500 stocks at the same instant while the SET could have stock prices spread out over an hour or so. It is quite possible that the SET was made at the opening of all 500 and most opened at their high for the day but staggared. Imagine taking the index value just using the high for the day of every stock and compare that to the actual high of the index for the day. The only way the index in that situation would have a high similar to the value if all the stocks hit their highs for the day at the same exact time.
So the SET was juiced higher because most stocks gapped up at the open with different open price times.
So the SET was juiced higher because most stocks gapped up at the open with different open price times.
I just spoke with a rep at the CBOE about the SET being 5 points higher than the high of the day for the SPX. He responded that SET was a settlement figure, as opposed to an index number. When I asked if it could be lower than the previous day's close, he didn't know. I've learned my lesson, and will return to the XEO.
Bob Engleman
Bob Engleman
Ick...seems highly rigable. It also explains a bit about today's opening action -- at least to me. Someone made a killing.
Thanks.
read above...
I might typically put on 4 to 5 positions a month and I only put on one at a time. So I think, Andy, that this is kind of what you are referring to.
I asked Coach a similar question about a month or so ago. Even though I do it my way, I think Coach is right in that I'm not sure one way is better consistently. It seems to matter mostly how the SPX is moving and the timing of getting in. Sometimes I feel like I did well, but last month, for instance, I feel like I missed making money because by waiting to get in, I couldn't get the strikes I wanted at the premium I wanted.
Still having said that, I would not feel comfortable placing my entire month's margin on one single credit trade. And I think Coach spreads out his margin as well, typically into two or three trades.
The other thing to think about is the number of positions you will have. If you have a lot of spreads that have a lot of different short strikes it can get confusing and difficult if you have to adjust. Sometimes this is a problem for me, but with only 4 to 5 spreads I can usually handle it. If I had 10 bull puts, for example, with 10 different short strikes, that could get difficult to manage and adjust if the market moved against me.
I asked Coach a similar question about a month or so ago. Even though I do it my way, I think Coach is right in that I'm not sure one way is better consistently. It seems to matter mostly how the SPX is moving and the timing of getting in. Sometimes I feel like I did well, but last month, for instance, I feel like I missed making money because by waiting to get in, I couldn't get the strikes I wanted at the premium I wanted.
Still having said that, I would not feel comfortable placing my entire month's margin on one single credit trade. And I think Coach spreads out his margin as well, typically into two or three trades.
The other thing to think about is the number of positions you will have. If you have a lot of spreads that have a lot of different short strikes it can get confusing and difficult if you have to adjust. Sometimes this is a problem for me, but with only 4 to 5 spreads I can usually handle it. If I had 10 bull puts, for example, with 10 different short strikes, that could get difficult to manage and adjust if the market moved against me.
That is why we discuss never holding a short position within 10 points of the THU close before SET. By then the posiiton should be quite profitable and no sense in risking a bad SET. Even a witching day SET was about 10 points so it is a good general rule although SET could be more.