SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Murray:
I only trade the ES and ER2 futures (SP500 and Russel 2000) on Tradestation so no option experience there. And with these E-minis, they are electronically traded and highly liquid with one tick b/a spreads so I usually can buy at the bid and sell at the ask- not always but most times.
I only trade the ES and ER2 futures (SP500 and Russel 2000) on Tradestation so no option experience there. And with these E-minis, they are electronically traded and highly liquid with one tick b/a spreads so I usually can buy at the bid and sell at the ask- not always but most times.
I started looking at diagonals with the weeklies and calendars but the weeklies have too few strikes to have the flexibility and I think my plate was pretty full as it is so I let it be for now.
I think 1210 and 1200 are safe strikes on the S&P, especially with the SPX at 1267 or so and renewed support of the previous breakout. I have my 120 1165/1175 put spreads for January I am trying to buy back for $0.05 (sold for $0.45) so I can roll up to the 1200 strikes as well.
On the call side I am not going to take any positions because we are at 4 year high territory so I am not yet sure of overhead resistance and want to avoid any JAN surges. So for right now I am still sticking with puts only.
On the call side I am not going to take any positions because we are at 4 year high territory so I am not yet sure of overhead resistance and want to avoid any JAN surges. So for right now I am still sticking with puts only.
That's what I keep looking at, not sure where the surge would slow down. If the SPX is hovering around 1300 the talking heads will go crazy so there might be some initial resistance there. I think I will sit tight until after the new year and see if we can get a feel for direction. Right now is flat but the bias is still upward IMHO.
ryan
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So Happy Holidays to all and please accept this gift solely as a good will gesture to all of you and your efforts here. I put no conditions on this gift except to enjoy! If it makes you buy the book, great, if it does not, just as great since it is, as I said, an unconditional gift from me to you. Risk management is so important I want this gift to realy mean something. I have enjoyed this profitable trading year more than any I have had in the past and it is because of the fun of exchanging ideas here.
Whether you like the chapter or not, please send your comments to me in PRIVATE as I do not wish to clutter this board with that topic or offend others who find it spammy. This is a gift, nothing more, nothing less. Please take it as such....
Happy Holidays and here is to a PROPSPEROUS 2006 with limited risk!
Coach Phil
As a way of thanking all for pariticipating in this thread and sharing their ideas and experiences, both pro and con, I wanted to offer a little free gift for all, one which I offered on my radio show and wanted to extend to all here as well.
The gift is the first chapter of my book in PDF format for all attached below as a link. The first chapter of my book, Option Trader Handbook, is focused solely on Risk and Trade Management (no option strategies are covered). I am not pushing the book or trying to spam you. I am offering this for free here for you to read at your own leisure with no conditions or promises or catches. I want to push my theme of risk management and that is all this chapter covers in general. You are not under any obligations and I do not expect all to love it. For those really advanced traders I am sure they have mastered risk management ideas and this is not new to them.
So Happy Holidays to all and please accept this gift solely as a good will gesture to all of you and your efforts here. I put no conditions on this gift except to enjoy! If it makes you buy the book, great, if it does not, just as great since it is, as I said, an unconditional gift from me to you. Risk management is so important I want this gift to realy mean something. I have enjoyed this profitable trading year more than any I have had in the past and it is because of the fun of exchanging ideas here.
Whether you like the chapter or not, please send your comments to me in PRIVATE as I do not wish to clutter this board with that topic or offend others who find it spammy. This is a gift, nothing more, nothing less. Please take it as such....
Happy Holidays and here is to a PROPSPEROUS 2006 with limited risk!
Coach Phil
I never did get around to posting my results for Dec. I opened an 1195/1205 put spread and a 1300/1310 call spread about 30 days before expiration for $1.00 credit total. I closed for $.05 each side 2 days before expiration for a net credit of $.90 (before commissions) which I was quite happy with as neither of my short strikes was ever in danger during the month.
ryan
ryan
Only 9% return in 30 days... that's okay I gues LOL
Good job and good strikes!
Good job and good strikes!
I played with fire in December in that I took on some bear call spreads. Although I was in the same range as others (1275 to 1285) I decided to close the spreads instead of rolling. In hindsight I overreacted, but at the time it really looked like 1300+ was a real possibility. I'm still dubious about rolling up multiple times during an expiration cycle. Realistically, when we roll we can only roll up 5 to 10 points before most of the profit is gone.
Coach, I'd be curious what you think about rolling up multiple times in an expiration cycle. In other words, if one has a short strike and it looks like it's going to be breached in a big way, do you think one should try to rollup with the understanding that more rollups will be required, or do you think it's generally better to get out and move on.
Upshot is that I lost 1.36% on margin this month because of the bear calls. Still, given my past poor performance in adjusting, I'm pleased that I kept the loss to a minimum.
Coach, I'd be curious what you think about rolling up multiple times in an expiration cycle. In other words, if one has a short strike and it looks like it's going to be breached in a big way, do you think one should try to rollup with the understanding that more rollups will be required, or do you think it's generally better to get out and move on.
Upshot is that I lost 1.36% on margin this month because of the bear calls. Still, given my past poor performance in adjusting, I'm pleased that I kept the loss to a minimum.
I think you do not want to adjust a specific spread more than 2x in a given expiration since if the market is really moving strongly against you, it is better to simply get out of the way. As you have seen from my threads I have never adjusted a position more than one time. Of course factors such as time to expiration, existence of partial hedges and actions taken on spreads on other side (i.e., assuming you also had puts when calls were in trouble, you could take profits and roll puts higher for more premium) ALL affect how you make adjustments.
There is no hard and fast rule but I will say 1 or at most 2 adjustments and I am more llikley to adjust closer to expiration where I am just looking for more cushion to let theta do its job as opposed to having to make an adjustment 30 days out and still expect to simply keep adjusting as the market keeps moving against me. Theta is the best friend when making an adjustment for more cushion and the further out from expiration you are, the less likely adjustments will help.
So keep it to 1 or 2 at most with closing the position as an always present choice. better to just get out of the way and likc your wounds then let the train run you over. That is why I use the buffer zone (15 0r 10 points) to trigger an analysis whether an adjustment is necessary. That zone lets me reanalyze based on movement in the SPX (technical analysis as well) and time to expiration and premium and partial hedges to determine if I make an adjustment or not and follow up to determine if a 2d one is needed or I just close out. With short time to expiration, i.e. one week, I am more than likely to keep adjusting to give me more theta room than close out unless the move has huge legs.
Also, a risk management approach hat cut your losses to 1.36% in a month is very good even if in hindsight it seemed overreactive and unnecessary. You would feel different if you would have had a 20% loss if you stayed in. You can over a 1.36% loss a lot easier than letting the market hand you a 20% loss on margin. Nickles and dimes also applies to losses as well as wins but of course we are not looking to lose thousands of times LOL.
There is no hard and fast rule but I will say 1 or at most 2 adjustments and I am more llikley to adjust closer to expiration where I am just looking for more cushion to let theta do its job as opposed to having to make an adjustment 30 days out and still expect to simply keep adjusting as the market keeps moving against me. Theta is the best friend when making an adjustment for more cushion and the further out from expiration you are, the less likely adjustments will help.
So keep it to 1 or 2 at most with closing the position as an always present choice. better to just get out of the way and likc your wounds then let the train run you over. That is why I use the buffer zone (15 0r 10 points) to trigger an analysis whether an adjustment is necessary. That zone lets me reanalyze based on movement in the SPX (technical analysis as well) and time to expiration and premium and partial hedges to determine if I make an adjustment or not and follow up to determine if a 2d one is needed or I just close out. With short time to expiration, i.e. one week, I am more than likely to keep adjusting to give me more theta room than close out unless the move has huge legs.
Also, a risk management approach hat cut your losses to 1.36% in a month is very good even if in hindsight it seemed overreactive and unnecessary. You would feel different if you would have had a 20% loss if you stayed in. You can over a 1.36% loss a lot easier than letting the market hand you a 20% loss on margin. Nickles and dimes also applies to losses as well as wins but of course we are not looking to lose thousands of times LOL.