SPX Credit Spread Trader

Bailed out of the Dec 1275/1280 position this morning that I originally entered when Coach posted his position. No adjustment at this time because the market is still going up.

Three things I've learned from November/December:

1) Strong historical stock market patterns need to be taken seriously

2) I've been trying to increase premium by playing short term market moves up (to place bear calls) and short term market moves down (to place bull puts). However, it's clear to me that I didn't pay attention to the larger picture, namely that the market was in a strong uptrend.

3) My original strategy is not to place trades at the strikes that Coach does, but to go further OTM. This is the first month that I placed the same trade as Coach and look what it got me :) (just kidding, but my original strategy has worked well for me so I'm going back to it).

Still have some bear calls with a short at 1285 :(
 
Quote from Dr. Zhivodka:

Wasn't it just a couple of weeks ago when some thought 1240 couldn't be hit?

:cool:
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Personally I thought the recent high of 1245 (July) would be tough to break through but the market shrugged it off like a little flea. With the optimism in the market right now the next stop will be the moon!

ryan
 
Well the market is showing some nice legs going into the holiday and since this is December and I really do not want to give back anything I made a series of adjustments today. Took a long time to get my trades in since the market was moving so much but let's follow along:


1. Remember I banked $6,000 on the DEC 1135/1140 Put spreads.

2. Closed the DEC 1275/1280 for $1.50. Sold them initially for $0.40 so loss of $1.10 or $33,000 (do not be put off by the $$ I just did more contracts but just follow along).

3. Sold 400 DEC SPX 1285/1290 for $0.60 or $24,000. I added to the contracts to cover the cost and also because I had margin room below my avergae margin use.

4. I tried to add to my DEC 1200/1205 puts but the premiums were bad and I could not get any fills. I closed them back out for $0.25 even to take them off and roll to higher strikes. I basically got screwed by the market running higher right after I took off those puts because my goal was to simply roll to 1205/1210 for the $0.30 for all 400 but the market had other ideas. So I sold 400 DEC SPX 1215/1220 Call Spreads for $0.30 or $12,000 to complete the condor. I went higher because the market ran away from me and killed all premium below that amount and my $0.55 limit order was not gonna get pushed through. I also feel that the market has too much support to get to this level again.

5. I left all my partial hedges in place since a strong continued upmove is still a risk.

Basically I want to stay ahead of the market and I have entered the mode of willing to give up any profits to simply not have a loss. If I make no money in DEC I preserve my year to date. I also can take a small limited loss if I have to and still preserve a 20%+ year return on margin.

SO here are the number boiled down:

Roll Loss: ($33,000)
New Calls at 1285 $24,000
New Puts at 1220 $12,000
Banked Profits $ 6,000

So for my DEC positions I am currently at a net credit of $9,000 should all positions expire worthless as they are (unlikely lol). If the market continues to run higher then I will bank some partial hedge profits as well to add to my $9,000 cushion so that I can close out the entire call position if I need to or simply roll higher. That will also go along with me rolling my puts higher to follow the market as well but not getting to close.

I might need some partial hedges on the downside although I currently do not see the risk there yet. I have about $10,000 in profits from the partial hedges and I could certainly take those now or let them grow if the SPX moves higher. Since I am not at 1285 I am inclined to let them run for now.

So I am in defense mode right now. Profits are secondary, right now I just want to prevent losses.

I think we are getting a little ahead of ourselves in the market but since SEPT and OCT were so bad, we are most likely swinging back to an extreme.



CURRENT REVISED POSITIONS AND REVISED HEDGES:

Positions:

- 400 SPX DEC 1215/1220 Put Spreads @ $0.30
(closed 1135/1140 Put Spread for $0.20 net profit)

- 400 SPX DEC 1285/1290 Call Spreads @ $0.60

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!)
 
I also have heard that many funds who have been shorting and made some money are looking to squeeze thos extra % points of return and are going long in the best time of the year to go long. Therefore, we might be seeing not so much overtly strong buying as a lack of selling coupled with these funds going long for the last month. I am sure the wash sale rule dumpers at 30+ days to the end of the year will force a small bounce lower in the market and then we will just coast the next few weeks as everyone might already be long the rally.

Quote from ryank:

Personally I thought the recent high of 1245 (July) would be tough to break through but the market shrugged it off like a little flea. With the optimism in the market right now the next stop will be the moon!

ryan
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Coach,
400 SPX DEC 1215/1220 Put Spreads -- isn't that a bit tight?

Quote from optioncoach:

Well the market is showing some nice legs going into the holiday and since this is December and I really do not want to give back anything I made a series of adjustments today. Took a long time to get my trades in since the market was moving so much but let's follow along:


1. Remember I banked $6,000 on the DEC 1135/1140 Put spreads.

2. Closed the DEC 1275/1280 for $1.50. Sold them initially for $0.40 so loss of $1.10 or $33,000 (do not be put off by the $$ I just did more contracts but just follow along).

3. Sold 400 DEC SPX 1285/1290 for $0.60 or $24,000. I added to the contracts to cover the cost and also because I had margin room below my avergae margin use.

4. I tried to add to my DEC 1200/1205 puts but the premiums were bad and I could not get any fills. I closed them back out for $0.25 even to take them off and roll to higher strikes. I basically got screwed by the market running higher right after I took off those puts because my goal was to simply roll to 1205/1210 for the $0.30 for all 400 but the market had other ideas. So I sold 400 DEC SPX 1215/1220 Call Spreads for $0.30 or $12,000 to complete the condor. I went higher because the market ran away from me and killed all premium below that amount and my $0.55 limit order was not gonna get pushed through. I also feel that the market has too much support to get to this level again.

5. I left all my partial hedges in place since a strong continued upmove is still a risk.

Basically I want to stay ahead of the market and I have entered the mode of willing to give up any profits to simply not have a loss. If I make no money in DEC I preserve my year to date. I also can take a small limited loss if I have to and still preserve a 20%+ year return on margin.

SO here are the number boiled down:

Roll Loss: ($33,000)
New Calls at 1285 $24,000
New Puts at 1220 $12,000
Banked Profits $ 6,000

So for my DEC positions I am currently at a net credit of $9,000 should all positions expire worthless as they are (unlikely lol). If the market continues to run higher then I will bank some partial hedge profits as well to add to my $9,000 cushion so that I can close out the entire call position if I need to or simply roll higher. That will also go along with me rolling my puts higher to follow the market as well but not getting to close.

I might need some partial hedges on the downside although I currently do not see the risk there yet. I have about $10,000 in profits from the partial hedges and I could certainly take those now or let them grow if the SPX moves higher. Since I am not at 1285 I am inclined to let them run for now.

So I am in defense mode right now. Profits are secondary, right now I just want to prevent losses.

I think we are getting a little ahead of ourselves in the market but since SEPT and OCT were so bad, we are most likely swinging back to an extreme.



CURRENT REVISED POSITIONS AND REVISED HEDGES:

Positions:

- 400 SPX DEC 1215/1220 Put Spreads @ $0.30
(closed 1135/1140 Put Spread for $0.20 net profit)

- 400 SPX DEC 1285/1290 Call Spreads @ $0.60

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!)
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Was not my intention to be at 1220 since I was going after the 1205 but with the market running to 1260, I have less fear on the downside than I do on the upside. I will most likely be adding a partial hedge on the downside just for some protection. My range has narrowed and not what I wanted to do really but I had to take what the market gave me within my comfort zone. I feel 40 points to the south is a good cushion but I am more concerned with my25 points to the north and what could happen next week. I still have a net profit as everything stands, not counting the profit in the partial hedges but that could change quickly so I am ready to add more partial hedges on either side. I will be quite happy if I walk away with DEC with $0 gain or loss and preserve my 27% return to date (last estimate). WIll still be happy if I finish at 20% and have to take a small loss. Right now I am in capital preservation mode and more moves may be necessary next week.



Quote from andysmith:

Coach,
400 SPX DEC 1215/1220 Put Spreads -- isn't that a bit tight?
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Coach,

I a sweating like a duck with my 1280/1285. I don't want to do anything now. I wanted to wait for it to touch 1270. Should I wait?

Thanks

Quote from optioncoach:

Was not my intention to be at 1220 since I was going after the 1205 but with the market running to 1260, I have less fear on the downside than I do on the upside. I will most likely be adding a partial hedge on the downside just for some protection. My range has narrowed and not what I wanted to do really but I had to take what the market gave me within my comfort zone. I feel 40 points to the south is a good cushion but I am more concerned with my25 points to the north and what could happen next week. I still have a net profit as everything stands, not counting the profit in the partial hedges but that could change quickly so I am ready to add more partial hedges on either side. I will be quite happy if I walk away with DEC with $0 gain or loss and preserve my 27% return to date (last estimate). WIll still be happy if I finish at 20% and have to take a small loss. Right now I am in capital preservation mode and more moves may be necessary next week.
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1. I did not know ducks sweat.

2. I cannot tell you conclusively whether 1280 is a safe strike. I just rolled my 1275 to 1285 and before that added all those partial hedges. The market is showing good strength although I think we are getting a little ahead of ourselves. Stay vigilent and be prepared to roll higher or get out. I am keeping a tight leash on these positions since we get very bullish around this time of year.


Quote from piccon:

Coach,

I a sweating like a duck with my 1280/1285. I don't want to do anything now. I wanted to wait for it to touch 1270. Should I wait?

Thanks
More...
 
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