trading vertical spreads on es

Can someone tell me why buying power effect changes but not my max risk when I'm setting up a vertical spread?

I'm looking at the /esu1 options for the Jul11 month. Es is at 1305 right now.

As the example I'd like to limit my risk to 1295. But instead of buying the call outright, I'm willing to cap my gain to reduce my premium(?)

So, I assume my position would be Buy 1295, Sell 1315.

If I buy the call outright my max loss is $688 but my buying power is -900. I don't understand why it changes my buying power more then my risk. Is this because margin?

But here is the other thing I don't understand. I'd think if I sell the higher call then I pocket the premium and can reduce my net outlay

The 1310 are going for 1.25/2.05. So I think I'd pocket $102.50

The numbers that the TOS doesn't make any sense to me though. When i select vertical it just shows price for the first one and not the second.

Very confused.
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What I mean is the "price" box doesn't change even when I change the order in the order entry on the web form.

Update!

Okay it changes on the desktop version. On the web version there is a button that shows me my break even price and some other good information. I do not see in the desktop version though.

Ideas where that is?

I'm referring to the "details box". If I click confirm & send then I get it on the desktop version.

Okay so now lets see if I can make sense of this
 
okay buying the 1295 call outright caps my risk at $675 with a break even of 1308.50. market is 1304. So they want around 4 points of premium.

Okay if I buy the 1295/1315 spread then

break even: 1305.50
Max profit: $485
Max loss: $515
cost of trade: $521
buying power - $632 (I don't understand this?)

So I'm getting charge about 1 point premium to limit my risk.

So lets try this 1295/1320

Break even: 1305.50
Profit: $725
Max Loss: 525
buying power = -670

I'm a bit confused here. Why is my max loss the same essentially? I see the credit only $45.

So the 1295 outright is $662.50

Okay, when i enter the sell, TOS hits the bid/ask with the limit. Hurhm. So I get $55 credit for selling the 1315.. not much credit

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One thing that confuses me a bit is that the calls that are deeper in the money are worth more.

This makes sense as market has to move further for them to be out of the money.

hmmm but shouldn't also if I buy a floor "closer" to the market then my risk should be less, so I should pay a higher premium.

Like at nadex let's say the market is 1302 and my floor is 1300 then I pay much higher premium to buy with the limited risk. But my dollar risk is less.

I'm trying to figure if calls work the same way. I guess they do.

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Now the other question is how do I know what type of delta I'm giong to get or is it even something I have to worry bout with a 1 to 2 day trade?

I need my option to increase at the same rate (or more) then the underlying
 
Let's start with some easy steps.

1. I create a spread by clicking when the mouse says sell for the short strike. I then hold down the ctrl key and click the long strike when the mouse shows buy. You can create up to four legs that way.

2. Under Layout, you can add/subtract columns in the option chain. Among them are the greeks, bid, ask, mark , volume, open interest, ...

3. When you have a potential order in the order entry form, click on the blue dot and select "Analyze Duplicate Trade."

Now review your questions and see what is left out.
 
1. Got it.
2. Got it.
3. Got it.

Thanks.

How fast/likely am I to get filled sitting on the limits? It looks like when I buy a call TOS uses the market price. But, it uses the limits when I buy a spread. Is it possible to change that? Is it advisable? Is it possible to say give me the midpoint between the bid/ask?

Also, let's talk about the delta. What exactly does that mean? If the volatility changes in the future will that change, as well?


Scenario 1
Let's say the ES has sold off. I'm bullish but I don't want to pay a lot of premium. I want to get a high delta and not be subject to the falling volatility. What type of option/spread am I looking at buying?

Scenario 2
ES is at 1303. I'm slightly bullish or neutral. How can I collect a premium? I.e example at NADEX they have fixed spreads, I get a premium if I buy a spread with more risk then reward.

I am primary looking at buying spreads for directional plays.

Quote from HowardCohodas:

Let's start with some easy steps.

1. I create a spread by clicking when the mouse says sell for the short strike. I then hold down the ctrl key and click the long strike when the mouse shows buy. You can create up to four legs that way.

2. Under Layout, you can add/subtract columns in the option chain. Among them are the greeks, bid, ask, mark , volume, open interest, ...

3. When you have a potential order in the order entry form, click on the blue dot and select "Analyze Duplicate Trade."

Now review your questions and see what is left out.
More...
 
I don't use TOS but any option broker will let you create a limit order, whether you're buying a single option or a spread. Most of the time using a market order for options is a very bad idea. When you do the market makers raise a glass and cheer, another damn fool has entered the arena.
 
rew: but someone has to cross the spread no? I was mentioning crossing at the mid point.

Quote from rew:

I don't use TOS but any option broker will let you create a limit order, whether you're buying a single option or a spread. Most of the time using a market order for options is a very bad idea. When you do the market makers raise a glass and cheer, another damn fool has entered the arena.
More...
 
One other question when I enter /es as the option

I get the following options

JUN5 11 (1)
JUL1 11 (2)
JUl2 11 (9)
JUL 11 (30)
AUG 11 (51)
AUG5 11 (63)

Is the JUL1, JUL2, JUL5 -- the weeklies? What is the number in the parenthesis, days until expiration? Is it listed somewhere exactly when the option expires?
 
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