SPX Credit Spread Trader

[rdemyan]

Extractor, welcome to the thread.

You say you've been doing this a long time.

I, for one, would appreciate it if you would share some of the trades that you are putting on and your general strategy. We're not interested in the number of contracts or amount of money you have committed, just the strikes and what your overall strategy is.

Post trades only if you want to as no one here is pressured to do so.

Thanks and I looked forward to reading your posts.

Quote from Extractor:

I have to agree with you that if there is still premium late in the game, it is due to the increased risk of being in the money. It is however all a balancing act of risk , reward , theta, probabilities, and directional diagnosis, so pick your poison. Lately , I have been more a buyer of options than a seller, and Oct and Nov. have given me reason to be happier than I would have been with credit spreads. I trade the SPX, Xeo, and the Spy, and am looking at the MNX, but I have been glad to have used the SPY for the last 2 months. Been doing this a long time, but am getting less risk tolerant in my old age.

 

[andysmith]

Coach,
TOS support told me they'd be adding this. The client tells the software which adjustments to track for which positions. You may want to check with them since I got this information rather informally.

Quote from optioncoach:

Although TOS is always responsive I doubt they will make this change. It becomes too hard to determine when someone has finished adjusting the current position and is actually entering in new separate transactions. For example if you have DEC positions and make adjustments and then add in JAN/DEC diagonals and then some partial hedges, the programming headache might not be worth it. It is true what is on now is the most important but I think the individual will just have to keep a running tally until the month closes to get to net risk. I actually record it when I makes such adjustments so I can always see my risk.

 

[andysmith]

Rolling Up 1270/1280 to where?

If you draw a trendline starting at the highs of Jan 2004, it touches the highs in Feb 2004, Mar 2004, Jan 2005, Mar 2005 and intersects DEC expiration at 1282. This is the "worst case" trendline I've been able to come up with. If I were to roll up, it'd be to at least 1290/1300 but more likely 1300/1310.

 

[Extractor]

Rdemyan, I dont want to get off topic too much, but started out in options , trading covered calls on stocks I had accumulated in a good siize IRA. Selling calls worked well for me in the 90's, since I didnt have a love affair with any of the stocks I owned. As you know there is little downside protection for this selling strategy, so it was no longer profitable durring the decline of the bubble.Also selling options was not allowed by the old line brokerage houses. When discount brokerage houses became an entity , and rules changed, I started selling deep out of the money credit spreads on equities. Found this to be too volatile and got whipsawed around a great deal. Too much reaction to news events and anylysts. I then switched to selling credit spreads on SPX using some historical guidelines that I have mentioned. Also sold credit spreads and Iron condors on the XEO, using 50 wide between the sold options. I do 10 lots , but still didnt like risk to reward ratio, but I was profitable, although nothing to rave about. To reduce margin and increase chance of larger reward, I began entering with a butterfly, 10 points between the buys and sells, and hoped not to adjust if possible, but with close to a 3 to 1 risk to reward , I could easily convert to a condor , either up or down , with now a 1 to 1 risk to reward . Didnt have to tie up the huge amounts of margin and it works pretty well but alot of time having to take it off in expiration week, when it gets pretty dicey. I now trade a short term proprietary system on the SPY a couple of times a week for smaller gains , but at the end of the month , a nice tidy sum, and on most days I go home flat with no position too worry about. If I see good premium in the SPX and its trending up , I still do bull put spreads , or if it is trending down bear calls , but I am more likely to take my profit as quickly as I can, as theta allows. If I sold for .50 and it quickly loses premium to .25, I'm gone. I love strong trends. I keep it pretty simple, using some very simple TA, and news events to help monitor the markets. However my expectations are low. I am happy to supplement my income by $2000 a month. Not trying to hit the jack pot.

 

[RichardRimes]

well...I've been still chewing on the set. In the last 11 months of this year set has been higher than the close of the day(thurs) 10 out of 11 months. Only April set was lower. Why? any clue? Are MM and other traders more pessimistic of how the underlying are doing? Now I will be more willing to risk a put short than a call short.

 

[jldavid47]

Quote from DonnaV:

well...I've been still chewing on the set. In the last 11 months of this year set has been higher than the close of the day(thurs) 10 out of 11 months. Only April set was lower. Why? any clue? Are MM and other traders more pessimistic of how the underlying are doing? Now I will be more willing to risk a put short than a call short.

Careful, Donna. That kind of linear thinking can cost you a ton of money. If a coin was flipped 11 times and 10 heads came up, the chance of a head on the next flip is still 50%. Maybe there is something going on, but maybe it was just a coincidence. You should probably continue to exercise due care on both sides of the position.

By the way, does anybody know where I can get historical SET values? I can't find them on the CBOE site and Yahoo doesn't have the history for it.

 

[RichardRimes]

while I may not disagree it still is quite interesting and I don't think in any way a mathmatical or statistical probability that 10 our of 11 times the set has been higher this year...thats just fact!

Quote from jldavid47:

Careful, Donna. That kind of linear thinking can cost you a ton of money. If a coin was flipped 11 times and 10 heads came up, the chance of a head on the next flip is still 50%. Maybe there is something going on, but maybe it was just a coincidence. You should probably continue to exercise due care on both sides of the position.

 

[RichardRimes]

I guess my point is that I do NOT think there is a (an) equivalency...in other words there may be no logical or mathmatical reason why the set is higher vs lower than the last quote...is there another reason?

Quote from DonnaV:

while I may not disagree it still is quite interesting and I don't think in any way a mathmatical or statistical probability that 10 out of 11 times the set has been higher this year...thats just fact!

Quote from jldavid47:

Careful, Donna. That kind of linear thinking can cost you a ton of money. If a coin was flipped 11 times and 10 heads came up, the chance of a head on the next flip is still 50%. Maybe there is something going on, but maybe it was just a coincidence. You should probably continue to exercise due care on both sides of the position.

 

[RichardRimes]

The monthly set is in data....(by year)is that what you are looking for?


By the way, does anybody know where I can get historical SET values? I can't find them on the CBOE site and Yahoo doesn't have the history for it. [/B][/QUOTE]

 

[qamhwr]

I am also a user of TOS and what you stated is correct. The risk graph shows only current positions. Closed positions are not included.

qamhwr

Quote from Extractor:

I have a question for any who might be programmers or real computer experts. I use TOS as my broker for trading SPX and other indices. Sometimes instead of Iron Condors , I enter with a butterfly, and then adjust it to a condor as the market trends. I have even had to adjust a third time by adding aanther fly to extend a wing even further. I wasnt aware of this, but the risk profile scenario is not correct after these types of adjustments are placed. I manually keep track of expences used to purchase adjustments against the maximum profit potential of the strikes I bought versus what I have sold. In talking to Tom Preston about it, the best I can reason is that the computer program doesnt remember the past trades, but just what you have on now. I believe Tom speaks Martian when discussing this , but it has been a problem for me in the past. Anyone else find this a problem when adjusting the Irons?