SPX Credit Spread Trader

burrben · Jan 10, 2006

Sold the 1200/1190's for .05. Picked up the 1250/1240 for .30. Took about 5min total.

sd

Quote from Synaptic:

Mr. Doyle,
With the straddle @ 17 right now you'd want to look at selling the 1250 right ? Looks like it might be worth about 15 cents right now ... maybe more later today if we keep dropping.

RichardRimes · Jan 10, 2006

good going coach..I'm amazed you got filled on so many contracts ...stupid open interest...whats up with the 1150,1175,1200,1225 they all have 20thou plus while in between strikes have a paltry #

Quote from optioncoach:

Took advantage of the down dip today to grab some FEB premium with 37 days left to expiration.

Sold 125 SPX FEB 1190/1205 Put Spreads @ $0.45 (.05/1.05 B/A)

Margin = $187,500

Credit = $5,625

Real Risk = Margin - Credit = 181,875

Return on Risk = Credit/RR = 3.09%

I think 1205 is relatively safe for FEB with several areas of support beofre it. If themarket moves back high today I may add some XSP puts at 125 or so as a partial hedge. If the market moves lower after that I can roll them into free bear put spreads and keep tiering the hedges on the way down.

But at 1285 and 37 days to expiration, 80 points OTM is a good strike. FEB ATM straddle is about $36 so this is more than double that and the delta of the 1205 strike is .07.

El OchoCinco · Jan 10, 2006

Added small partial hedge just in case this trend fades on us lol. I figured it was not too expensive and if the market starts falling I can sell lower strike puts for a cost-free hedge and keep laddering on the way if I need to. If not, the after-hedge return is still nice for 37 days.

Adjusted position:

BTO 10 XSP FEB 125 Puts $ 0.55 or $550

Sold 125 SPX FEB 1190/1205 Put Spreads @ $0.45 (.05/1.05 B/A)

Margin = $187,500

Credit = $5,625 - $550 (hedge) = 5075

Real Risk = Margin - Credit = 181,875

Return on Risk = Credit/RR = 2.79%

This return can go higher if hte market dips since I can sell 124 or 123 Puts to reduce the cost and increase the net credit. Why am I adding a partial hedge before one is really needed. More in line with my conservative approach to the first quarter. 37 days out is still a nice chunk of time so let me add it now and if the market stays up I still make 2.79% for the month. If market dips lower, I roll the hedge into a bear put spread and get it for free. If market really dips, the hedge finances any potential adjustment.

Nice and easy with a squeegie Wheezie.

Sailing · Jan 10, 2006

See Coach....

As soon as you added the partial hedge... (puts), the market goes up! Would you atleast give us a 10 minute warning next time!

Murray

Quote from optioncoach:

Added small partial hedge just in case this trend fades on us lol. I figured it was not too expensive and if the market starts falling I can sell lower strike puts for a cost-free hedge and keep laddering on the way if I need to. If not, the after-hedge return is still nice for 37 days.

Adjusted position:

BTO 10 XSP FEB 125 Puts $ 0.55 or $550

Sold 125 SPX FEB 1190/1205 Put Spreads @ $0.45 (.05/1.05 B/A)

Margin = $187,500

Credit = $5,625 - $550 (hedge) = 5075

Real Risk = Margin - Credit = 181,875

Return on Risk = Credit/RR = 2.79%

This return can go higher if hte market dips since I can sell 124 or 123 Puts to reduce the cost and increase the net credit. Why am I adding a partial hedge before one is really needed. More in line with my conservative approach to the first quarter. 37 days out is still a nice chunk of time so let me add it now and if the market stays up I still make 2.79% for the month. If market dips lower, I roll the hedge into a bear put spread and get it for free. If market really dips, the hedge finances any potential adjustment.

Nice and easy with a squeegie Wheezie.

El OchoCinco · Jan 10, 2006

I posted the partial hedge trade at 12:23 PM when the S&P was around 1286. The market did not top out at near 1290 until an hour later. Plenty of time to fade my position LOL.

Quote from Sailing:

See Coach....

As soon as you added the partial hedge... (puts), the market goes up! Would you atleast give us a 10 minute warning next time!

Murray

ryank · Jan 10, 2006

I tried several times throughout the day to get filled on the 1180/1190 Feb put spread for .45 but couldn't get it done. The spread was bouncing from .25/.75 to .30/.70. I knew my chance of getting filled at .05 off the mid was slim but was too stubborn to shave another .05 since I like to get .50 in credit for my spreads.

ryan

El OchoCinco · Jan 10, 2006

With the market moving bakc higher and that far OTM I am sure the MMs were reluctant to budge but it was worth putting the order in. If we move back lower somewhat tomorrow, try it again but move the strikes up 10 and see what happens. I think 1200 short strike is still a good selection.

Quote from ryank:

I tried several times throughout the day to get filled on the 1180/1190 Feb put spread for .45 but couldn't get it done. The spread was bouncing from .25/.75 to .30/.70. I knew my chance of getting filled at .05 off the mid was slim but was too stubborn to shave another .05 since I like to get .50 in credit for my spreads.

ryan

Drofman · Jan 10, 2006

I attended the TOS Beyond BAsics seminar in Scottsdale today and confirmed that it will not be a problem with them. I was up in Scottsdale all day and have not had a chance to contact OE yet. I notice that I still have the 9 contracts in my account, even though the bid and ask are identical for the SPX 1205/1195 Put spread. I will call in the morning and ask why the full order has not be filled. Jack

Quote from feydnaway:

With TOS if you dont change the order no matter how many trades it takes to fill the whole order its treated as one transaction. This is company policy no need to contact them for it to happen.

ryank · Jan 11, 2006

I signed up for the OptionPlanet Beyond the Basics free seminar in Chicago on 1/23. I've never been to a seminar like this, it should be educational and interesting I'm sure. Anybody else going?

ryan

ryank · Jan 11, 2006

Quote from optioncoach:

With the market moving bakc higher and that far OTM I am sure the MMs were reluctant to budge but it was worth putting the order in. If we move back lower somewhat tomorrow, try it again but move the strikes up 10 and see what happens. I think 1200 short strike is still a good selection.

I knew my chances of getting filled were slim to none because the quotes were the same or better than the next higher strikes from time to time. I guess a retail trader like me can't play the arbitrage (kinda sorta) game like the big boys.

ryan