SPX Credit Spread Trader

[skanan]

Cache,

Actually, what TOS recommend is not to have 50 positions (stocks). They recommended using indexes. Each 2.5% a trade could be use on the same index so you can have 30% in SPY but you don't put on 30% of that on the same day. You use 2.5% each time you make a trade. They suggest spreading this out on different strikes, expirations and etc.

On the TOS minibasket advisory service where I follow, they trade 2.5% each week and so far they have traded on SPY, DIA and IWM.

-Nick

Quote from Cache Landing:
This only works with large accounts where you can spread out your money between 50 different positions. That is the only way you could possibly promote a set it and forget it strategy. (Hence the <2.5% allocation to each trade statement) As a slightly more experienced option trader, I think that actively managing 50+ positions at once is very difficult. I really try to stay under 15. I also think that passively managing a position that is only 2% OTM on an issue like SPX is insane. And if you are playing a tighter, slower issue then you wouldn't really get a great credit either. Just my opinion. [/B]

 

[nlslax]

Quote from rdemyan:

Just got filled on the SPX MAR 1330/1345 bear call at $0.60. I called ToS for help since I was asking for $0.65 when the mid was at $0.725 to $0.75. After looking at the individual legs, the ToS guy suggested $0.60. I relented, and got filled in less than 2 minutes.

redmyan,
With a 15 pt spread @ .60, IYHO how many spreads does it take to make the trade worthwhile?

Thanks.

 

[rdemyan]

My trading style is to be fairly FOTM, so I'm willing to accept less credit perhaps than others.

I typically trade 10.

Quote from nlslax:

redmyan,
With a 15 pt spread @ .60, IYHO how many spreads does it take to make the trade worthwhile?

Thanks.

 

[andysmith]

It's a lot worse than "some protesters throwing rocks at a Danish embassy in Afghanistan".

Join the dots.

First the muslim riots in France. Then Hammas the murderers elected to office. Then Danish embassies burning in multiple countries. And now Iran. These cartoon-hating home-boys are pissed.

The public anger is likely to harden Iran's stance. Now that's scary.... I don't think the market has priced in any of this.... bought several put spreads today.

Quote from optioncoach:

Some protesters throwing rocks at a Danish embassy in Afghanistan is not going to rock the U.S. economy. It makes sense they are outraged at the cartoons even though their reaction may be considered over the top. However, it still does not affect all the normal patterns of trade and finance that affect the market so it is a non-event. I doubt it should matter since none of it drives the price of stocks. It just reinforces the turmoil that we already know to exist in the region.

 

[Sailing]

Credit Spreaders,

It appears many of you are watching a lot of TV, CNBC.... etc.

May I suggest trading real price movement rather than newsmania. It's a lesson learned from the past which has made trading a much nicer and profitable environment. Try it... just turn off the tube.... makes your trading plan much clearer and easer to follow.

Besides... if you must... check out bloomberg.... rather than Maria. Not as pretty to watch, but much more informative.

Murray

 

[Cache Landing]

Quote from skanan:

Cache,

Actually, what TOS recommend is not to have 50 positions (stocks). They recommended using indexes. Each 2.5% a trade could be use on the same index so you can have 30% in SPY but you don't put on 30% of that on the same day. You use 2.5% each time you make a trade. They suggest spreading this out on different strikes, expirations and etc.

On the TOS minibasket advisory service where I follow, they trade 2.5% each week and so far they have traded on SPY, DIA and IWM.

-Nick

Thanks. That makes a little bit more sense from a portfoilio management standpoint.

So are they suggesting something like selling an SPX bull put spread that is 2% OTM. Then if the index goes down selling another bull put (at different strikes) that is now 2% OTM. And so on and so forth until the index reverses or establishes a downtrend and you are able to start selling bear calls? Or are they suggesting getting into an IC from the beginning?

My question remains. From someone who has followed this style of trading, do you find yourself in a situation where that many different positions (even on the same index) gets hard to manage? Are they treating each trade as if it is a completely different trade or just an adjustment to the previous position?

 

[nlslax]

Quote from rdemyan:

My trading style is to be fairly FOTM, so I'm willing to accept less credit perhaps than others.

I typically trade 10.

Is it your strategy to eventually set up an IC, or generally are you satisfied with selling only one side of the underlying?

 

[rdemyan]

The trade I posted today completed an IC with about an overall 9% return on margin (after commissions), if both sides expire OTM. In general, my plan is to set up an IC, but I don't push it as much as I used to. I'm getting better at just being satisfied with one side if the market dictates it.

Quote from nlslax:

Is it your strategy to eventually set up an IC, or generally are you satisfied with selling only one side of the underlying?

 

[nlslax]

Quote from rdemyan:

The trade I posted today completed an IC with about an overall 9% return on margin (after commissions), if both sides expire OTM. In general, my plan is to set up an IC, but I don't push it as much as I used to. I'm getting better at just being satisfied with one side if the market dictates it.

You're more patient than I am. With my FOTM IC's I sometimes err on the side of higher yield and sacrifice "batting average."

I see the value of not pushing it - I just need to get better at practicing it.

 

[CashCache]

I think this is my single biggest issue. I am so concentrated on adding the other side to complete the IC because of the lack of addition margin, that I overlook the trend of the market. Looking back at when this didn’t work, I would have been much better with my initial entry (either the Bull Put or Bear Call). Of course, it didn’t help matters to be so close to the action.

I am learning to accept less credit to be "right" more often.

-Cash

Quote from rdemyan:

The trade I posted today completed an IC with about an overall 9% return on margin (after commissions), if both sides expire OTM. In general, my plan is to set up an IC, but I don't push it as much as I used to. I'm getting better at just being satisfied with one side if the market dictates it.