SPX Credit Spread Trader

Coach,

If you recommend to get out of an SPX credit spread when the price gets within 15 points of your strike price, do you have the same recommendation for the OEX and RUT?

Also, is the RUT an American or European style option?

I presently have the Dec. 1285/1300 bear call spread for SPX and the Dec. 720/730 bear call spread for RUT.

daved275
 
Previously it seems like the difference between the SPX futures and the SPX was about 3 or 4 points. This morning it is 9 points. Does this mean anything in terms of what the SPX will do?
 
Quote from rdemyan:

Previously it seems like the difference between the SPX futures and the SPX was about 3 or 4 points. This morning it is 9 points. Does this mean anything in terms of what the SPX will do?
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March futures are the front-month. Dec go otb this week.
 
So, let me make sure I understand. You're saying that the reason is that the front month on the futures is, relatively speaking, further out now versus the SPX than it was in the past when the difference between the two was only 3 or 4 points.

Thanks.

Quote from riskarb:

March futures are the front-month. Dec go otb this week.
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Basically what happens is that the futures price you see is rolled over from the DEC contract to the MARCH contract so the diffrence is greater due to the time difference between the cash index and the futures. As DEC expiration approaches, the DEC futures will get closer to the actual cash market. It can throw you for a loop on your charts if you were following and did not notice the rollover lol.

Andy: Mods must have deleted it, It was not me lol.


Quote from rdemyan:

So, let me make sure I understand. You're saying that the reason is that the front month on the futures is, relatively speaking, further out now versus the SPX than it was in the past when the difference between the two was only 3 or 4 points.

Thanks.
More...
 
Well I do not necessarily recommend you get out at 15 points within you short strike but use that as a market to reevaluate and either get out, do nothing or adjust strikes further out. This is where individual skills come into play on a strategy like this because it will be a personal preference for most people. I have stayed in when I felt resistance or support was still in place and market would pull back. Other times I have simply adjusted because previous support and resistance was taken out.

But it has to be different with the OEX and RUT because the scale is different. With OEX I believe 5 - 7.5 points is a good trigger zone for analysis and RUT would be 10 - 15 for safety I guess (have not traded RUT all year long really so I have lost touch with it).

I have not looked it up but since RUT is an ETF I would assume it is American style like SPY or QQQQ.

As for the 1285 0r even 1280 strike on SPX the only concern is a huge overblown rally on notes from the FED announcement. The rate hike is expected but what the FED says could send the DOW up about 100 points and the SPX up abou 10 - 12 points or so. We are at 1261 as of now so a surge like that tomorrow would still be safe for you as long as we are at this level tomorrow but a follow up surge testing new highs could cause some concern. If you have at least 50% of the credit as profit then taking it is not a bad idea really. Hindsight might make you mad if the market only spazzes up to 1275 but it is still a good risk management idea and just imagine the market surging to 1285.

Again it is a personal preference. I heard that a surge could test 1280 by end of the week which would keep you safe even including Friday morning SET but you have to balance the reward of the full credit with the risks of a post FED announcement explosion because people will buy on any news.

Quote from daved275:

Coach,

If you recommend to get out of an SPX credit spread when the price gets within 15 points of your strike price, do you have the same recommendation for the OEX and RUT?

Also, is the RUT an American or European style option?

I presently have the Dec. 1285/1300 bear call spread for SPX and the Dec. 720/730 bear call spread for RUT.

daved275
More...
 
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