SPX Credit Spread Trader

[RichardRimes]

Quote from Cache Landing:

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?

At every seminar I have been to they DO NOT even mention SPX as a trading vehicle other than don't trade it they prefer the smaller indices which for most traders is probably the best. While I do not disagree with them......I've been making money on these FOTM SPX trades....so far

 

[rdemyan]

nlslax:

I was a little surprised that you were asking me these questions, since I've had the impression, from your posts, that you are a sophisticated retail trader.

But you're right it's the emotional side that we are all victims of. I lost about 25% of my account over the summer due to some real arrogance (after being successful for months), then followed by stupidity after the #@* hit the fan. But with the help of this forum, I've righted the ship and am back on track. Right now my biggest problem is sticking with the nickel and dime approach. I have days where it's a real struggle not to place a very high reward/very low probability trade (for example, my GOOG trade last month). It's gonna take me over a year to get the losses back, but I have to keep reminding myself that I'm learning skills and an unemotional approach that can last me for a lifetime of trading.

Quote from nlslax:

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.

 

[RichardRimes]

didn't see the second paragraph...they do emphasize the importance of the over-all portfolio management...and yes it is important to weigh each trade within the position as to how it affects the overall position as well as the portfolio. I guess that is why they don't recomend too many stocks,etc. My only question then is what about diversification?

 

[nlslax]

Quote from 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

Very true.
Being right pays off very well in the long run. Hitting alot of singles pays off very well in the long run.

I used to trade that way, have slowly moved away from it. I should have realized it when I noticed I was spending too much time during the day watching my account.
I need to remind myself that good consistant trading is a journey, not a race. Time to reel this boy back to reality.

That's all for now. I've used up my daily allowance of metaphors.

 

[skanan]

For index, they suggested SPY instead of SPX and recommend IC. After so many positions mingle together, you look at total greeks instead. Then you hedge you delta risk by reducing it to your own comfortable level. The key thing is to keep generating Theta and hedge your portfolio. If there are short calls/puts in the money, leave them alone until there are 5-10 days left.

For example, you start with IC but then your net delta become 200 because SPY went down. You decide that you want to reduce delta to about 100, you sell call spread to reduce the delta.

I adopt their trading style in SPY but be more directional. I also use Coach's stretegy to far OTM on SPX. Both produced good result since Dec. However, the market was trending up too.

Quote from Cache Landing:

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?

 

[WD40]

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? [/B]

they look at all the trades as ONE portfolio. they would pepper the market with positions like buckshots... longs, shorts, calls, puts... some at one sigma, others are at 2%, more at 3%, etc. ... eventually, when you look into the pot, you might identify an IC here, a calendar there, or was it a prego? or ratio? ... well, it doesn't really matter, because they would add up all the positions to form one portfolio... and they would let the worthless contracts expire... or roll into more credits... and add more to the pot once in a while... they do it in such a way that the uninitiated would think that they are doing it haphazardly. But there is a method to their madness. The secret is, they manage everything by the greeks.

 

[andysmith]

Broke through pivot at 1260. Next support is 1245.

 

[andysmith]

George Soros is buying put spreads. I think he has a small account at TOS.

http://money.cnn.com/2006/01/27/news/international/pluggedin_fortune/index.htm

 

[andysmith]

You can use VIX (the bottom chart) as an intermediate term market direction indicator. It works very well. And it indicates sideways markets too.

The bottom chart is basically two MAs of VIX.

Have fun!

 

[bobbyvl]

Coach,

Thanks for your input. Do you know for the same range in an IC, if SPY offers the same premiums as SPX or if one have better premiums and faster fills than the other?

Bob

Quote from optioncoach:

You certainly can do Iron Condors on any index or index ETF. The Qs do not have as wide a range as the sPX so naturally the strike selection and range is much tighter and you need to take that into consideration. If youdo not like the SET feature of the SPX, then look into the SPY, which I still think is too tight to go sufficiently OTM. But I assume SPY and QQQQ have the same drawbacks.

One thing I have said often on this journal is that there is no reason that SET should be problem. There is no reason to hold a position through SET if you are within 10 points of your short strike, and perhaps even 15 points. I may do it in a rare situation based on some underlying analysis of the market but it is very easy to avoid the problems of SET, and that is closing your position if your short strikes are close to the index. You shoudl still be able to get out with a profit.

I do not personally track ro trade the Nasdaq so in theory you can credit spreads on the Naz and perhaps use the MNX (too lazy to look it up I hope that is right lol) or so as well as the QQQQs.