SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Well the spread was $7.00/$11.00 after jumping around looking at different strikes for rolling into FLYs and stuff so I put the order at the mid-point at $9.00 and got filled. $9.50 or so was my goal in legging into an IRON FLY selling the 1195/1205 call spread but no dice. So in hindsight I got a great fill.
The weekly chart will give you some great clues about where the market is likely to go based on cycle analysis....
Quote from optioncoach:
At the time, the cost to close the spread outright would have been about $9,000 - 11,000 depending on fill which could have been reduced by rolling down. The credits at lower strikes are a little light right now. I saw the potential to box for little or tiny loss but I could not get filled at all at better than $9.00. The goal was to get a fill near $9.50 since the spread was so wide ($4.00!) So after pouring over the charts and the position I decided I wanted to see how this adjustment would play out. After a while, the calculations on paper become meaningless without seeing how it would play out.
So in most cases I would simply hold pat or add a SPY partial hedge but a lot of technical indicators I follow on the charts indicate more downside potential. So I would like to enter some more OTM put spreads after more of a drop to grab lower strikes at better premium as well as increase number of contracts. Is it a gamble? Yes the market could surge back higher over the month and leave me with a small loss.
But I had this nagging feeling that I had to try this adjustment and test it out for real under these conditions. As many here know, I find the best test of ideas is to put some money on it and have done so in the past.
So is the smartest move now? Time will tell. I do know that I now hope for a nice downward drop so I can enter more put spreads. If the market reverses strongly, then yes folks, I will find the call spreads of interest since the headwinds appear stronger than before.
LMAO. EGARCH mumbo jumbo. Don't follow gold but on equity indices GARCH et al have been shown by some to fare little better on out of sample performance vs. IV and historical where volatility forecasting is concerned and therefore not worth my time IMO, though do have tools available e.g. Hoadley to leverage if required 
Thanks for the input mo
The BOX max value is the difference between the strikes.
As for the BOX v. Rolling, it is technically the same thing since the BOX in effect closes the put spread. I was explaining to someone else that I was comparing costs of rolling into an IRON FLY or a BOX v. closing the spread and my calculations were that if I could get the mid-point of the call spread it was a slight improvement over closing the spread.
So my net effect is to close the 1185/1195 and roll to the 1165/1180. I chose to do it the BOX way partially as a test of the method and also since at the time I saw a slight advantage of the BOX method. Of course an hour after doing so the 1185/1195 put spread quotes changed and maybe I could have gotten out at better than $1.00 which would have led to the same $9,000 loss on closing the put spread.
As I said before, I was working this out all on paper and after a while I decided the only way to test this was to do it and add the BOX. It may be the wrong move or not but I wanted to put real money into it and see the results. If I am wrong, I really only lost slightly more on the BOX v. rolling down and the fact that the net position is still a positive credit above 1180 means I am earning $ for the lesson.
I invite you to follow along and if it was a bad idea, you learned from my trade and if it was a decent idea, then you can work out the details on paper too and run your own analysis.
I am certainly open to criticism but sometimes I need to put the money where my mouth is. Just remember that the BOX is the same as closing the put spread so one has to compare closing the spread outright v. rolling into the BOX. My drunken eyes were seeing an advantage in the BOX at the time.
I know some of you might be scratching your heads as to why I did this so I hope i have explained it from my perspective. I had to place the trade to see the real mechanics and as I have said, I actually saw a better lower loss from the BOX than I did from closing the spread.
As for the BOX v. Rolling, it is technically the same thing since the BOX in effect closes the put spread. I was explaining to someone else that I was comparing costs of rolling into an IRON FLY or a BOX v. closing the spread and my calculations were that if I could get the mid-point of the call spread it was a slight improvement over closing the spread.
So my net effect is to close the 1185/1195 and roll to the 1165/1180. I chose to do it the BOX way partially as a test of the method and also since at the time I saw a slight advantage of the BOX method. Of course an hour after doing so the 1185/1195 put spread quotes changed and maybe I could have gotten out at better than $1.00 which would have led to the same $9,000 loss on closing the put spread.
As I said before, I was working this out all on paper and after a while I decided the only way to test this was to do it and add the BOX. It may be the wrong move or not but I wanted to put real money into it and see the results. If I am wrong, I really only lost slightly more on the BOX v. rolling down and the fact that the net position is still a positive credit above 1180 means I am earning $ for the lesson.
I invite you to follow along and if it was a bad idea, you learned from my trade and if it was a decent idea, then you can work out the details on paper too and run your own analysis.
I am certainly open to criticism but sometimes I need to put the money where my mouth is. Just remember that the BOX is the same as closing the put spread so one has to compare closing the spread outright v. rolling into the BOX. My drunken eyes were seeing an advantage in the BOX at the time
.I know some of you might be scratching your heads as to why I did this so I hope i have explained it from my perspective. I had to place the trade to see the real mechanics and as I have said, I actually saw a better lower loss from the BOX than I did from closing the spread.
Wanted to point out that ET's Chit Chat forum is highly entertaining if you haven't checked it out yet.... it's kinda like the Jerry Springer show where you laugh AT the people on stage.
Chit Chat forum really demonstrates the penetration of AOL dial-up into trailer park communities all across the deep South. Check it out when you need a laugh...
Chit Chat forum really demonstrates the penetration of AOL dial-up into trailer park communities all across the deep South. Check it out when you need a laugh...
Donna alert! sold 25 Mar 1190P (half my allotment) decided prudence better part of valor as I'm concerned that Feb 1225 could be in danger next week and if we go down some more which my bones and charts seems to suggest I can use those contracts to finance my Feb cover.
but what the heck do I know I'm JUST a housewife/retail trader
edit: price I got was 3.60 ....10cents off the mid to the MM
but what the heck do I know I'm JUST a housewife/retail trader
edit: price I got was 3.60 ....10cents off the mid to the MM