SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
No more risky than anyone else trying condors on the "weeklies."
I've got a good credit and a good range. Yes, it requires constant monitoring. And significant risk. I am prepared to hedge with futures as needed, as well as bail out once my limits are reached.
My point was, watch open interest as opex approaches. Many people were worried about a trend change. I am pointing out another factor, which I have not seend discussed here yet.
"Max Pain" does not always work, but it's amazing how often it does.
What kind of risk/reward are you getting for the 1 week condor? Personally find weeklies better for cheap directional bets or short term hedging as they are mostly gamma. Would like to take advantage of theta too but just not enough strike selection to make it work IMO.
Good luck!
MoMoney.
PS.
Some earlier OI/Max Pain musings here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=904586#post904586
and here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=904961#post904961
Good luck!
MoMoney.
PS.
Some earlier OI/Max Pain musings here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=904586#post904586
and here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=904961#post904961
I agree, weeklies have poor strike selection. But the week before opex you're using all the regular strikes.
Enjoyed your musings, they seem to be right on course.
I don't play opex all the time. And have been burned as a newby, so am very careful. I only trade 3 contracts. Risk? 2.1 brought in. Risk is 7.9. Return on risk is 26.5% I think we're rangebound for the week, with wild swings. That's my personal expectation and how I'm playing it. I will close out before SET.
I will hedge with futures if my short strike becomes threatened.
This can be extremely profitable on a regular basis. But one bad month takes out a whole lot of profit. Not for the meek.
My point was to take a look at opex before you start adjusting and rolling. It may give you another clue as to market direction.
i am looking for thoughts on this situation. if you were short a spx 1275/1265 credit put spread ($3.65 credit) for feb; what would you all do if you were holding this at this moment, hypothetically of course?
i am leaning toward reopening a march credit spread, seeing that i am bullish.
also, what would be better, closing the feb, or letting it cash settle? thanks.......
i am leaning toward reopening a march credit spread, seeing that i am bullish.
also, what would be better, closing the feb, or letting it cash settle? thanks.......
I am assuming you sold this spread some time ago given the current price of the SPX and 4 days to expiration and the current price of the spread. The real question underlying your hypo is whether any of us feel that the SPX will be back above 1271.35 by SET.
I think we have shifted to sideways/bearish movement based on the technicals but I cannot say for sure we will not be above 1271 by this Friday morning SET. The bigger questions is what is your risk management approach to this spread? Will you get out if the spread costs you 2x to buy back. Was there some bullish confirmations you were seeing in the charts and if they are broken would you just get out? If you feel you are lost on these questions then, it might not be worth risking $6.35 to make $3.65.
Letting the position cash settle v. closing out depends on a lot of factors and how far you are from expiration. Since you are ITM on your short put and have a paper loss right now, the more important questions were asked in the paragraph above. If you are willing to risk the $6.35 for a chance of a bounce in the next 3 days then you can stay in but that is more of a hope position unless you have some strong analysis to back up the belief. And that is never a good way to trade.
I like to say that staying in a losing position is only bad if you had no real justification for being in it. If you do your analysis then you still could be wrong and that is a part of trading. However, even in those situations you still need to think ahead to cut those losses when it does happen.
I think we have shifted to sideways/bearish movement based on the technicals but I cannot say for sure we will not be above 1271 by this Friday morning SET. The bigger questions is what is your risk management approach to this spread? Will you get out if the spread costs you 2x to buy back. Was there some bullish confirmations you were seeing in the charts and if they are broken would you just get out? If you feel you are lost on these questions then, it might not be worth risking $6.35 to make $3.65.
Letting the position cash settle v. closing out depends on a lot of factors and how far you are from expiration. Since you are ITM on your short put and have a paper loss right now, the more important questions were asked in the paragraph above. If you are willing to risk the $6.35 for a chance of a bounce in the next 3 days then you can stay in but that is more of a hope position unless you have some strong analysis to back up the belief. And that is never a good way to trade.
I like to say that staying in a losing position is only bad if you had no real justification for being in it. If you do your analysis then you still could be wrong and that is a part of trading. However, even in those situations you still need to think ahead to cut those losses when it does happen.
Not a bad idea since we seem to bouncing sideways for now...
Where is the profit coming from if the spread is underwater from when it was initiated?