SPX Credit Spread Trader

Well the market keeps rolling higher so I rolled my SPX long 1265 Calls into another cost-free bull call spread by selling the 1270s for the same $6.00. So I started with $6,000 spent on hedges and turned it over twice and still have my $6,000 free to spend on more hedges which looks like it might be necessary. Will update if I grab another partial hedge, perhaps in the XSP since I already have SPY and SPX. Looks like an adjustment might be necessary for my 1275/1280 spread :(


CURRENT REVISED POSITIONS AND REVISED HEDGES:

Positions:

-300 SPX DEC 1190/1195 Put Spreads @ $0.25
(closed 1135/1140 Put Spread for $0.20 net profit)

-300 SPX DEC 1275/1280 Call Spreads @ $0.40

Hedges:

+ 200 SPY DEC 127 Calls @ $0.30
- 200 SPY DEC 128 Calls @ $0.30 (rolled into free hedge!)

+ 10 SPX DEC 1265 Calls @ $6.00
- 10 SPX DEC 1270 Calls @ $6.00 (rolled into free hedge!)
 
Quote from optioncoach:

Well the market keeps rolling higher
More...

I think I am going to skip the call spreads this month. Since we broke 1245 it is hard to see where this trend might run into a head wind. I have a put spread at 1195/1205 that I am looking for a quick, small profit this week and then get out. I waited until expiration last week before putting on any spread for Dec. Not any premium left, may have to sit out until we get closer to Jan expiration. I don't know if I will be able to do this, the "missing out" bug may bite me (hopefully the market doesn't :D ).

Great plays with the "free" hedges Coach!

ryan
 
Mo and Doinna, interesting that you should consider open interest, or even the concept of the market or MM causing maximum pain, because my spread sheet friend also studied and correlated open interest to the SPX 100 pt condor and XEO 50 pt condor and discovered that in the last week you could sell premium 10 pts above and 10 pts below the max open interst strike , and have a positive expectancy system going. But much like Coach, you had to be on the lookout for that number to change, and be ready to adjust or get out. I traded this a few times, but it became too wild a ride for me, and two of my most profitable trades , became profitable with a butterfly adjustment. Too crazy for me however.
 
Seems like you're on a roll with the hedges. May as well give up with the credit spreads!

Wondering if you'd considered locking in the profit of the long hedges by rolling them up (selling the appropriate vertical) so you retain maximum upside potential in case you need it, instead of adjusting into the debit spread.

Curious what your thoughts are.

Momoney.

Quote from optioncoach:

Well the market keeps rolling higher so I rolled my SPX long 1265 Calls into another cost-free bull call spread by selling the 1270s for the same $6.00. So I started with $6,000 spent on hedges and turned it over twice and still have my $6,000 free to spend on more hedges which looks like it might be necessary. Will update if I grab another partial hedge, perhaps in the XSP since I already have SPY and SPX. Looks like an adjustment might be necessary for my 1275/1280 spread :(


CURRENT REVISED POSITIONS AND REVISED HEDGES:

Positions:

-300 SPX DEC 1190/1195 Put Spreads @ $0.25
(closed 1135/1140 Put Spread for $0.20 net profit)

-300 SPX DEC 1275/1280 Call Spreads @ $0.40

Hedges:

+ 200 SPY DEC 127 Calls @ $0.30
- 200 SPY DEC 128 Calls @ $0.30 (rolled into free hedge!)

+ 10 SPX DEC 1265 Calls @ $6.00
- 10 SPX DEC 1270 Calls @ $6.00 (rolled into free hedge!)
More...
 
Tried to use OX live help to goose a trade today. The mid of the b/a was .10 above my limit so I thought if I had them call the floor I would have a good chance of getting filled. I was told that you sell at the bid and buy at the ask and my limit was too far from the bid and wouldn't be filled. I told him that I have been filled at mid -.10 many times but they didn't seem interested in calling the floor for me so I canceled my order and said screw it! Looks like I will be calling the trading desk directly if I want to try and get something filled instead of waiting.

Ok, done ranting for a little bit.

ryan
 
MoMoney,

"I think you can find an optimal way of sizing the position and possibly pyramiding etc. to remedy that situation though. The goal being to get roughly the same amount of credit as you would have done from FOTM but by having much less margin tied up overall during the course of the position."
-- Well, that's promising but I have not found it yet.

"Not hugely different to how I approach it, though I'm not sure I could extract the heuristics of my schizophrenic style quite so concisely."
-- Schizo is good! Be great if you could write up your approach too.

"Are you doing it this month too?"
-- Not sure yet -- I wonder if SPX is going straight to 1500!!!!! How about you?



Quote from momoneythansens:

Andy,



I see. If your focus is on total $ returned then I can see why this strategy might disappoint or not fit your criteria. I think you can find an optimal way of sizing the position and possibly pyramiding etc. to remedy that situation though. The goal being to get roughly the same amount of credit as you would have done from FOTM but by having much less margin tied up overall during the course of the position. In other words, if you look at it from that point of view, it is actually less risky.

Yes, we should say the probability, of blowing out of the iron fly is higher than a FOTM spread. And part of the strategy is probably dealing with more losing months than our friends that employ the FOTM strategy. However, as I'm sure you noticed, even when the spread is ITM, it doesn't cost as much to buy it back relative to the credit received compared to a FOTM equivalent in the same dilema. I know you know all of this but I'm just trying to formulate a way of emphasising some of the pros.



Sounds pretty solid. Has the KISS factor. Not hugely different to how I approach it, though I'm not sure I could extract the heuristics of my schizophrenic style quite so concisely.

Interested to know what you mean by playing the swings to build up almost-free hedges. Are you talking about gamma scalping or building expectancy etc.?

I think you may have picked a couple of bad months to try it. Are you doing it this month too?

Momoney.
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Mmmmm....

I hope it does keep going up. The higher it goes, the lower VIX becomes. My mouth is watering at the prospect of loading into long vega and possibly short delta positions.

Momoney.

Quote from andysmith:

"Are you doing it this month too?"
-- Not sure yet -- I wonder if SPX is going straight to 1500!!!!! How about you?
More...
 
Looks like everyone who expects the year-end rally is simply buying into ahead of time which is, in effect, causing the rally. I had 1260 as a price target but it looks like it could hit it rather soon and then hopefully pause some lol. I am preparing myself for adjustments on the 1275/1280 calls and glad I am loaded on some partial hedges to offset my cost. I have been looking at teh 1300/1305 strikes to roll up to since the credit seemed worthwhile. To further cover the cost I may roll up and expand the number of contracts on the call side and then add more contracts on the put side as well. I still have more room in my average margin used so ratching up the margin will not take me out of my comfort zone but will help me adjust to the market surges. Sort of like moving the wall back and higher lol with still plenty of sand left to build with ;).

I would expect Wednesday and Friday to be relatively quiet since most people will be out travelling or shopping. Therefore, a nice pullback tomorrow would be nice leading into Thanksgiving. We are certainly due. If not then I will keep monitoring my hedges and look to adjust if we get above closer to 1260.

Since we are at 4 year highs and 1260 is my target, I do not have strong indications of the next resistance point so I will want more cushion up top.

Phil

Quote from piccon:

Coach,

When are we going to see that pullback. What would you do with a DEC 1225 PUT that you have now?
More...
 
Andy, agreed that the flys cost more later in the game, but I liked putting on the fly with under 3 weeks to go, usually the thurs or Fri of the week before the last 2 week period. I wanted theta to continue over the weekend, if that is possible. The TOS platform allowed me to store the upward and downward adjustment, and monitor their prices day to day. If my breakeven was about to be broached I would usually adjust, and yes it ate into a big slice of the profit, but usally 3 adjustments were available and the trade could still be profitable. I held to Wed. for the theta to kick in hard and would get out usually in the last 15 min of trading. By the way, some of my best premium fills have come after 4:00 pm as long as the trade was already qued up prior to 4.
 
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