SPX Credit Spread Trader

ryank · Feb 23, 2006

It's too quiet in here, time to bump us to the top of the list.

Coach's call hedge is working for me today, pushing the market down and helping my call spread. I'm looking at put spreads for March but being so late in the cycle it is hard to find good premium at a strike I am comfortable with.

ryan

ryank · Feb 23, 2006

Quote from labib52:

Nbbo quotes and direct quotes? which one to use?
thanks

Labib Imtanes

NBBO Spread Quote
An NBBO Spread Quote reflects the best quotes printed from participating exchanges on each leg of the spread or other combination combined. For a long leg, the NBBO single leg "ask" quote will be used, while short leg quotes will use the NBBO "bid" quote to combine for a synthetic NBBO combination trade quote.

ryan

labib52 · Feb 23, 2006

Quote from ryank:

NBBO Spread Quote
An NBBO Spread Quote reflects the best quotes printed from participating exchanges on each leg of the spread or other combination combined. For a long leg, the NBBO single leg "ask" quote will be used, while short leg quotes will use the NBBO "bid" quote to combine for a synthetic NBBO combination trade quote.

ryan

Thank you that's the definition that OX give , but which one do you use?

ryank · Feb 23, 2006

Quote from labib52:

Thank you that's the definition that OX give , but which one do you use?

I go off the NBBO spread and look at what the spread is on the individual contracts to see where I might get a fill.

ryan

El OchoCinco · Feb 23, 2006

Well we have a confused market I would say. After a strong breakout of the price channel, the SPX has bounced back and forth for a ferw days and we have a small upward sloping flag of sorts forming. I do not see any clear directional indication but overall how the market holds itself over the next few days will be crucial for the next directional signal.

My long call hedge worked like a charm so far as the market dropped two days ago after I placed the trade. Despite yesterday's surge, the market pulled back about 50% of that move. Could it wipe out the rest tomorrow or will it continue its upward move?

What I am seeing are strong headwinds for now. If the market can break that 1295 resistance then it will have to deal with the phsychological resistance of 1300. Absent any amazing strong news, I do not see the market shooting past 1300 in the next week or so. If it does, there will be some pause around 1300 for sure. On the down side, this upward breakout could fizzle and send the market back to the downward sloping line towards 1275.

So merging the two potential paths together I pretty much see a rangebound market between 1275 on the downside and 1300, possibly 1315 on any upside breakthroughs, from now until MAR expiration. Without a major catalyst, I cannot see how the market can fight its way out of this range in the next 3 weeks.

andysmith · Feb 23, 2006

Right shoulder forming.....

Quote from optioncoach:

Well we have a confused market I would say. After a strong breakout of the price channel, the SPX has bounced back and forth for a ferw days and we have a small upward sloping flag of sorts forming. I do not see any clear directional indication but overall how the market holds itself over the next few days will be crucial for the next directional signal.

My long call hedge worked like a charm so far as the market dropped two days ago after I placed the trade. Despite yesterday's surge, the market pulled back about 50% of that move. Could it wipe out the rest tomorrow or will it continue its upward move?

What I am seeing are strong headwinds for now. If the market can break that 1295 resistance then it will have to deal with the phsychological resistance of 1300. Absent any amazing strong news, I do not see the market shooting past 1300 in the next week or so. If it does, there will be some pause around 1300 for sure. On the down side, this upward breakout could fizzle and send the market back to the downward sloping line towards 1275.

So merging the two potential paths together I pretty much see a rangebound market between 1275 on the downside and 1300, possibly 1315 on any upside breakthroughs, from now until MAR expiration. Without a major catalyst, I cannot see how the market can fight its way out of this range in the next 3 weeks.

rdemyan · Feb 24, 2006

Coach:

The search feature is exceedingly slow today. Would you mind reposting your current positions.

Also, what's your opinion on a 1220/1235 March bull put currently with a mid at about $0.60.

Thanks.

Quote from andysmith:

Right shoulder forming.....

El OchoCinco · Feb 24, 2006

Took me a while but I found the last post of my current positions lol.

My Current Positions:

- 150 SPX 1185/1195 BOX Spreads (something funny about saying the words "box" and "spread" in the same sentence.)

Net Loss = $9,000 or $0.60

- 175 MAR SPX Iron Condors 1165/1180/1335/1350 @ $1.15

Credit = $20,125
Risk = $242,375
Return = 8.3%

NET RETURN (including BOX adjustment) = 4.6%

El OchoCinco · Feb 24, 2006

rdemyan:

A 1220/1235 March bull put spread is about 50 points OTM with 3 weeks left to go to expiration. Not a bad cushion given a few support points between now and then. However a close at 1245 still puts the short puts in jeapordy given the 3 Witching SET we could have so you have to think that you have 40 points of room.

It is a little tight inside my "Curling" comfort zone and borderline since one bad drop in the market (i.e. 10 point day or more) followed by continued slides could raise your heartbeat levels a bit. I do not think 1235 is a a value we will see by March expiration so it is a decent trade in that sense. However, it is a postion that could be quite stressful so I would be hesitant to add that risk with 3 weeks to go and instead look towards a good April entry.

Quote from rdemyan:

Coach:

The search feature is exceedingly slow today. Would you mind reposting your current positions.

Also, what's your opinion on a 1220/1235 March bull put currently with a mid at about $0.60.

Thanks.

piccon · Feb 24, 2006

Coach,

I was looking at entering some April Call Spread now but I tought it would be too early.

Do you enter 2 weeks to expiration or 3?

Piccon

Quote from optioncoach:

rdemyan:

A 1220/1235 March bull put spread is about 50 points OTM with 3 weeks left to go to expiration. Not a bad cushion given a few support points between now and then. However a close at 1245 still puts the short puts in jeapordy given the 3 Witching SET we could have so you have to think that you have 40 points of room.

It is a little tight inside my "Curling" comfort zone and borderline since one bad drop in the market (i.e. 10 point day or more) followed by continued slides could raise your heartbeat levels a bit. I do not think 1235 is a a value we will see by March expiration so it is a decent trade in that sense. However, it is a postion that could be quite stressful so I would be hesitant to add that risk with 3 weeks to go and instead look towards a good April entry.