SPX - Expensive Lesson

R

rbfallon

Wow, I just screwed.

I had a bear call spread open last Thursday on the SPX with the short strike at 2015 and the long strike at 2020. I know these settle at the opening price Friday morning. The SPX was around 2007 just before close Thursday afternoon and I believed the trend was down, so I didn't close the spread since I thought it would open less than 2015 Friday morning, and they would expire worthless.

Well, I was right, the SPX opened at 2012.74......wrong, the settlement is based off of the "Set" index, see here: https://www.google.com/finance/historical?q=INDEXCBOE:SET&ei=RpGLUaCWA4LEqgG2DQ

I learned that the "Set" index is based off the actual value of all the 500 companies in the s&p and varies wildly from the actual spx. The "Set" index opened Friday morning at 2022.46, almost a full 10 points higher than the SPX, making both of my strike's ITM.

Cost me $15K.

This is my first post here that I can remember and just wanted to warn everyone here or who may be searching for information, not to make this mistake.....
 
When I started trading SPX iron condors maybe a year ago I was told never let them expire. Prudent advice that I have always followed.
 
Yes it is a very expensive lesson and the market makers are quite happy there are always ppl out there who forget/don't know. I was sitting on ES options and during the night made sure I was covered....it sucks and I still think there is manipulation going on with the SET but its part of the "slippage" you learn to expect. Look at ES options next time because you can trade the night before.
 
you just didn't understand what you did
you traded SPX Sep options
and what opened at 2012 was SPX dec and on Thursday at 2007 was also SPX dec
SPX sep closed near 2020 I believe.
S no, you haven't lost anything because some mess up
you lost because of your lack of understanding of what you trade
 
I know exactly what I did and understand the trade very well. The only lack of understanding was the index used to determine the opening price.

The SPX opened on Friday the 19th at 2012.74:

https://finance.yahoo.com/q/hp?s=^GSPC+Historical+Prices


kashirin said:
you just didn't understand what you did
you traded SPX Sep options
and what opened at 2012 was SPX dec and on Thursday at 2007 was also SPX dec
SPX sep closed near 2020 I believe.
S no, you haven't lost anything because some mess up
you lost because of your lack of understanding of what you trade
More...
 
The SET is often manipulated. Generally its a good idea to carry no exposure into the SET. We've all been burned by it at some point.
 
I don't see SET manipped nearly as much as VIX. You traded into BABA's IPO... that's all it was. A 1% SET into the biggest IPO in history in a exuberant market. I would think that knowing that Friday was the open of BABA would have kept you out of any bear spreads.
 
VIX is worst. But I've seen the SPX SET be manipulated as well. I think it's from program desks who have large customer orders they can use.

It's difficult for a derivs desk to manipulate the SET the same way they can manipulate the VIX.
 
You're right, should have played it safe, although the market actually closed down for the day which is what I expected it to do.

convexx said:
I don't see SET manipped nearly as much as VIX. You traded into BABA's IPO... that's all it was. A 1% SET into the biggest IPO in history in a exuberant market. I would think that knowing that Friday was the open of BABA would have kept you out of any bear spreads.
More...
 
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