SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Here is the simpleton answer from my side although riskarb can give you the professional answer. Triple witch is when index and equity options, futures and options on futures expire. With all those derivatives expiring, many large players and market makers use the indexes or equities to hedge their positions, lock in profits, offset deltas, etc... and all this activity occurring on the same day can have a voltile effect on the market as a whole.
Okey doke, but.....we both know that SET doesn't neccessarily correspond with where the market actually goes.
So, what I meant was, whilst your TA might say that resistance for SPX is at 1220, that doesn't constrain where SET might end up due to the way it is calculated i.e. SPX might very well observe that resistance level come Friday morning, but lady SET, being a more free-spirited hippie chick, could end up somewhere over the rainbow or knocking on the door of your 1230.
I know it's unlikely and it's a minor point. Your TA is a first line of defence. I totally get what you're saying. I suppose I'm just manifesting my scepticism of all things TA.
As always, your logic and principles are sound, well thought out and clearly explained.
Momoney.
So, what I meant was, whilst your TA might say that resistance for SPX is at 1220, that doesn't constrain where SET might end up due to the way it is calculated i.e. SPX might very well observe that resistance level come Friday morning, but lady SET, being a more free-spirited hippie chick, could end up somewhere over the rainbow or knocking on the door of your 1230.
I know it's unlikely and it's a minor point. Your TA is a first line of defence. I totally get what you're saying. I suppose I'm just manifesting my scepticism of all things TA.
As always, your logic and principles are sound, well thought out and clearly explained.
Momoney.
You are right but my point was more that if the index is at 1218 and 1220 is strong resistance and absence triple witch or major earnings announcement, I am not expecting a large open higher the next morning where SET would leap past my 10 point cushion. Lack of known catalyst would not threaten resistance at the open. With 1220 as resistance, I would not expect Friday morning buying pressure that would lead to a large gap open and killer SET. The SET could certainly be higher than 1220 once all stock open but with little fuel in the morning and that overhead resistance I do not expect much of push at the open or a SET so far above the 1220 level in this example.
With NOV SET we had a STRONG opening on Friday so SET was skewed very high. Based on the rules matrix I posted as I said, this market being so volatile it would not be as prudent to stay in a position within 10 points. Also knowing GE or who ever was gonna report, I would run.
It is not a perfect approach and like I said from teh matrix, the closer I get the more likely I would be to get out since I am not willing to die for a nickle, but TA helps me gauge if there are any headwinds that would temper the next morning's open and thus allow a 10 point cushion to be safe. Again this all assumes no 3Witch and a GE announcing earnings. If a major DOW or S&P component is going to announce that could throw all rules out the window and pretty much did in NOV.
With NOV SET we had a STRONG opening on Friday so SET was skewed very high. Based on the rules matrix I posted as I said, this market being so volatile it would not be as prudent to stay in a position within 10 points. Also knowing GE or who ever was gonna report, I would run.
It is not a perfect approach and like I said from teh matrix, the closer I get the more likely I would be to get out since I am not willing to die for a nickle, but TA helps me gauge if there are any headwinds that would temper the next morning's open and thus allow a 10 point cushion to be safe. Again this all assumes no 3Witch and a GE announcing earnings. If a major DOW or S&P component is going to announce that could throw all rules out the window and pretty much did in NOV.
Nuff said 
This discussion is good though as it reinforces an overlooked issue with respect to trading SPX options... that bee-yach called SET.
Quote from momoneythansens:
Nuff said
You say tomato, I say tomahto, you say bee-yach, I say hippie chick.
Yes, discussion always useful...but not at the expense of getting RSI. I need better posture and/or a life.
Yes, discussion always useful...but not at the expense of getting RSI. I need better posture and/or a life.
Was that for a profit though? If you made money on the position there is nothing wrong with taking it if it means removing yourself from a potentially risk scenario with a FED meeting. Profit-taking is something you never need make excuses for.