SPX Credit Spread Trader

I am not fully covinced on the XSP v. SPX. With the SPX I get more strike choices since I can go every 5 points. Also, if I look at FEB now on SPX I am looking at 1160s or so for short strikes and here is what I find.

FEB SPX 1150/1160 put spread can be sold most likely at $0.40 based on b/a spread and average shaves needed to fill.

FEB XSP 115/116 has a b/a of $0.00/$0.10 and a fill of $0.05 is likely.

If I want to use $100k in margin I can sell 100 SPX spreads for $4,000 or 1,000 XSP spreads for $500.

I still see more premium on selling deep OTM on the SPX and would not like cutting it by 1/10 and still going that far OTM.

What strikes are you using for comparison to determine the XSP spreads seem better?


Quote from Sailing:

Coach,

We've been playing with the XSPs....... it appears that the credit received for the same SPX position is a little better on a percentage basis.... and you're not fighting the b/a as much.

Would you agree?

Murray
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Will not even profess to know anything about the semiconductor index.... more than happy to keep this strategy to S&P :)


Quote from andysmith:

Coach,

Have you looked at doing credit spreads on SMH (ETF that tracks the semiconductor index)?
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Coach,

What do you think Institutional buyers will be doing next week assuming we close today at our current level of about 1248 ? Buying .... Selling ?
 
Quote from optioncoach:

Will not even profess to know anything about the semiconductor index.... more than happy to keep this strategy to S&P :)
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For a change, have been doing IC's on RUT the past few months. Vols and swings much greater than what I am used to on SPX.

Getting same credits, but further OOM than w/SPX. But the swings (beta) vs. SPX makes me plan to stick mostly w/SPX going forward.

RUT doesn't correlate well to the rest of the market. That can be a good/bad thing. I sleep easier w/SPX.
 
The place where I think the Russell beats the S&P is on futures trading. I have been having more success daytrading the ER2 than the ES because the ER2 has had more price swings throughout the day than the ES.

But as for credit spreads on the index, still think that the breadth of strikes available OTM and the premium still makes it the best for this strategy even with the @#$% MMs and their wide spreads.

Quote from nlslax:

For a change, have been doing IC's on RUT the past few months. Vols and swings much greater than what I am used to on SPX.

Getting same credits, but further OOM than w/SPX. But the swings (beta) vs. SPX makes me plan to stick mostly w/SPX going forward.

RUT doesn't correlate well to the rest of the market. That can be a good/bad thing. I sleep easier w/SPX.
More...
 
Coach,

This topics has come up before... does theta decay actually work over the long weekend or has that decay been priced into (spread out over) the number of actual trading days? In other words, does it make a difference whether one sells a credit spread on a Fri versus a Mon? I've heard conflicting answers...
 
The first 2 trading days of JAN 05 were sharp down days for the SPX. I expect one of two things to happen the first week in JAN:

1.) Like in 05, the first two days or so will be down days followed by the usual pause that will accompany such a sharp move lower off the mid-DEC highs (and 4 year highs at that).

2.) When a support line is broken, it can be followed by retracement back to the now resistance line where the big money finds a second entry and begins to short the market again.

Either way I can see the first week being down to flat based on the above. I would only deem today to be a false breakout if we push back above the support/resistance line on strong volume. For that to happen, we would need all the big boys to come back from New Year's in a nice buying mood. As of today, do not believe that to be likely...

Quote from Synaptic:

Coach,

What do you think Institutional buyers will be doing next week assuming we close today at our current level of about 1248 ? Buying .... Selling ?
More...
 
The answers I have seen is that it is somehow priced perhaps on Friday throughout the day in such a manner that one cannot benefit off of it against the MM. But 3 days of theta 3 weeks out out may not be that noticeable anyway. It might mean a move of $0.15 and if priced in smoothly, you might never notice it since throughout the day the market is moving and other greeks are working on the price.

That is the non-riskarb answer LOL.

Quote from andysmith:

Coach,

This topics has come up before... does theta decay actually work over the long weekend or has that decay been priced into (spread out over) the number of actual trading days? In other words, does it make a difference whether one sells a credit spread on a Fri versus a Mon? I've heard conflicting answers...
More...
 
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