SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
I took a look. If you had just bet long for the year there was 42 pts net difference between the Thursday close and the Friday SET -- of course if you had bet short!
That doesn't take into account cost of buying the option and the distance to the next strike...but for a rough cut it might be worth looking into a bit more.
Since the SET could go either ways, and being an optimist, I sat on a SPX 1240/1250 Bear Call Spread---taking a chance that the SET would recover my loss(SPX was approx $1242). Well, the opposite of Donna, I suffered a $10,000 loss. I had a 1.16 credit for max profit of $1,160. Now that I think about it I took a $10,000 risk for $1,160 potential profit. If the probability of lower SET was no better than 50/50 it was not a smart decision to not sell for $2,000 loss---as painful as that might have been.
Probably several lessons here.
1) analyze the probability before decision
2) never get into this position in the first place (I had rolled from 1230/1240 so was doing something to adjust--just should have rolled again or dropped out)
Feeling very dumb right now. Anyother lessons you might see here? Thanks, Jack
My Optionsxpress account has a $19.95 per leg minium for the spreads. If you do several spreads of 20 contracts (i.e. 10 long puts and 10 short puts) the cost is $19.95. If you do more on one order it is $1.25 per contract. What I'm getting at is that you can save some commissions doing it that way as well as managing risk in a way by "reading" the market and placing the spreads appropriately. Of course, as has been pointed out, you may end up with lower credit than if you had placed one spread all at once or you could end up with more. It comes down to what you are comfortable with. I think it is a good idea to do it in maybe 2-3 smaller chunks, but that is just my opinion.
ryan
Jack:
Sorry you had to take such a big loss. I've been there myself and being part of a trading group like this can really help you move forward smarter.
There were a couple of us, including myself, who had 1240/1250 Nov bear calls on. Coach did warn us that we were fighting the typical end of the year uptrend of the market. I got out after it was clear to me that the market was going up (I didn't adjust because I believed that adjusting wouldn't help which to me means that the SPX could bust through my short with no end in sight so better to get out). I got out fairly early so my profit was down for November but I was still profitable to the tune of 2.5% of committed margein.
This loss you took will put risk management in the forefront, which is what Coach advocates. But most likely in several months you'll have it back. So, if I may suggest, join in with us in the forum here. Post trades that you're considering and I'm sure you'll get some feedback. I would not, though, blindly follow others with their trades, but by all means consider what others are doing and solicit advice. This, IMHO, will increase the odds substantially that you'll be more profitable and even more importantly minimize the losses you'll take.
Good luck!
Sorry you had to take such a big loss. I've been there myself and being part of a trading group like this can really help you move forward smarter.
There were a couple of us, including myself, who had 1240/1250 Nov bear calls on. Coach did warn us that we were fighting the typical end of the year uptrend of the market. I got out after it was clear to me that the market was going up (I didn't adjust because I believed that adjusting wouldn't help which to me means that the SPX could bust through my short with no end in sight so better to get out). I got out fairly early so my profit was down for November but I was still profitable to the tune of 2.5% of committed margein.
This loss you took will put risk management in the forefront, which is what Coach advocates. But most likely in several months you'll have it back. So, if I may suggest, join in with us in the forum here. Post trades that you're considering and I'm sure you'll get some feedback. I would not, though, blindly follow others with their trades, but by all means consider what others are doing and solicit advice. This, IMHO, will increase the odds substantially that you'll be more profitable and even more importantly minimize the losses you'll take.
Good luck!
Quote from Drofman:
Since the SET could go either ways, and being an optimist, I sat on a SPX 1240/1250 Bear Call Spread---taking a chance that the SET would recover my loss(SPX was approx $1242). Well, the opposite of Donna, I suffered a $10,000 loss. I had a 1.16 credit for max profit of $1,160. Now that I think about it I took a $10,000 risk for $1,160 potential profit. If the probability of lower SET was no better than 50/50 it was not a smart decision to not sell for $2,000 loss---as painful as that might have been.
Probably several lessons here.
1) analyze the probability before decision
2) never get into this position in the first place (I had rolled from 1230/1240 so was doing something to adjust--just should have rolled again or dropped out)
Feeling very dumb right now. Anyother lessons you might see here? Thanks, Jack
I paid the price but I learned a lot since I have been in this group.
For example I just accepted $0.50 for 1280/1285 but I am ready as soon as SPX close above 1246 to buy the DEC or the January as protection. I still believe we will see some pull back. Now 1300 is the best trade for safety but there is no credit at all.
We shall see
For example I just accepted $0.50 for 1280/1285 but I am ready as soon as SPX close above 1246 to buy the DEC or the January as protection. I still believe we will see some pull back. Now 1300 is the best trade for safety but there is no credit at all.
We shall see
IV:
You're suggestion sounds interesting, but I have to agree in that I couldn't follow it. If you could please post a hypothetical trade and show us how the entire trade would be put on (the 1/4 that you mentioned and so on), that would be great.
None of us here, including Coach, believes we have all of the answers. We're learning new things all the time (as an example, previously most of us were not using butterflies to adjust our credit spreads, but in the future I believe many of us will start doing this).
You sound like you have interesting ideas to contribute and we'd certainly be happy to hear what you have to say.
Good trading to you.
You're suggestion sounds interesting, but I have to agree in that I couldn't follow it. If you could please post a hypothetical trade and show us how the entire trade would be put on (the 1/4 that you mentioned and so on), that would be great.
None of us here, including Coach, believes we have all of the answers. We're learning new things all the time (as an example, previously most of us were not using butterflies to adjust our credit spreads, but in the future I believe many of us will start doing this).
You sound like you have interesting ideas to contribute and we'd certainly be happy to hear what you have to say.
Good trading to you.