Who Sells Vertical Credit Options Spreads on Weekly Options?

Mine are vertical, but I guess technically ratio spreads. I'm trading ES puts buying at 1:2 with the buy around the money, maybe a hair above and the sells about 20-25 pts down with 10 days or so til expiry. I can put these on for a small credit or flat. I'll take off the 2nd put in the $1 range and move the long put down 5 when I can do so for 4...(80% of max value).

Expiry yesterday worked out quite well as I had a 1845/1825 for about a $2 credit, then managed to move the long put down 3 times to pull out 12 pts. Obviously this is optimal and not every week works out this well.

For the 17th I had a 1850/1825 for a 2.15 credit. The 1850 has already been moved to 1845 for another $4, so I'm still sitting on that.


Obviously, I have stops in place should we have a big sudden move down overnight and this strategy really only works in this type of low vix environment.
 
Nice.. Whatever works for you, stick to it.

Quote from ktm:

Mine are vertical, but I guess technically ratio spreads. I'm trading ES puts buying at 1:2 with the buy around the money, maybe a hair above and the sells about 20-25 pts down with 10 days or so til expiry. I can put these on for a small credit or flat. I'll take off the 2nd put in the $1 range and move the long put down 5 when I can do so for 4...(80% of max value).

Expiry yesterday worked out quite well as I had a 1845/1825 for about a $2 credit, then managed to move the long put down 3 times to pull out 12 pts. Obviously this is optimal and not every week works out this well.

For the 17th I had a 1850/1825 for a 2.15 credit. The 1850 has already been moved to 1845 for another $4, so I'm still sitting on that.


Obviously, I have stops in place should we have a big sudden move down overnight and this strategy really only works in this type of low vix environment.
More...
 
Quote from ktm:

Mine are vertical, but I guess technically ratio spreads. I'm trading ES puts buying at 1:2 with the buy around the money, maybe a hair above and the sells about 20-25 pts down with 10 days or so til expiry. I can put these on for a small credit or flat. I'll take off the 2nd put in the $1 range and move the long put down 5 when I can do so for 4...(80% of max value).

Expiry yesterday worked out quite well as I had a 1845/1825 for about a $2 credit, then managed to move the long put down 3 times to pull out 12 pts. Obviously this is optimal and not every week works out this well.

For the 17th I had a 1850/1825 for a 2.15 credit. The 1850 has already been moved to 1845 for another $4, so I'm still sitting on that.


Obviously, I have stops in place should we have a big sudden move down overnight and this strategy really only works in this type of low vix environment.
More...


Excellent example of how to trade futures options! thanks for sharing
 
Quote from TskTsk:

There is no edge in shorter time to expiry
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For any directional bet, I think this is absolutely false.
In fact, the whole premise of being able to forecast for short time horizons grew an entire subsector of the marketplace wth participants called high frequency traders.
 
Quote from syswizard:

For any directional bet, I think this is absolutely false.
In fact, the whole premise of being able to forecast for short time horizons grew an entire subsector of the marketplace wth participants called high frequency traders.
More...

But HFT doesn't deal with options. The point is that in theory there is no edge in shorter duration if you're just looking to make theta with no delta risk. Go closer to expiry, you have more theta but also more gamma. If you look at term structure you can often find better bets further out.

If your purpose is to take directional delta bets, then yes, shorter duration gives you more delta sensitivity. But why not just trade the underlyer instead?

Anyways I have good experience just going long a wide fly or short straddle for vol. Look at the term structure for total of 1-2 months out, go with the highest IV, for instance today (see attachment) I would look at the Jan'31 Put first and foremost. Hold until IV drops a bit, repeat.

By assuming static vol surface you can get a feel for how it will look if ul moves or when time moves and what your profits would be. It's obviously not a realistic assumption, I have simulations based on historical data for vol surface behavior that I use. But 1wk forward vol on Jan31 should be down 1pt if all goes well.
 

Attachments

Quote from TskTsk:

But HFT doesn't deal with options. The point is that in theory there is no edge in shorter duration if you're just looking to make theta with no delta risk. Go closer to expiry, you have more theta but also more gamma. If you look at term structure you can often find better bets further out.

If your purpose is to take directional delta bets, then yes, shorter duration gives you more delta sensitivity. But why not just trade the underlyer instead?

Anyways I have good experience just going long a wide fly or short straddle for vol. Look at the term structure for total of 1-2 months out, go with the highest IV, for instance today (see attachment) I would look at the Jan'31 Put first and foremost. Hold until IV drops a bit, repeat.

By assuming static vol surface you can get a feel for how it will look if ul moves or when time moves and what your profits would be. It's obviously not a realistic assumption, I have simulations based on historical data for vol surface behavior that I use. But 1wk forward vol on Jan31 should be down 1pt if all goes well.
More...

But if you're saying look 1-2 months out and picking the highest IV why not take that Feb 7th Put for an extra 15 bps vs the Jan 31?

Plus that would extend your time horizon more -- to be around the (1) one month time frame?

Also that IV is great as long as price stays flat or down. Is that a realistic bet? If so, isn't that (in theory) taking a directional stance?
 
Quote from barney-:

But if you're saying look 1-2 months out and picking the highest IV why not take that Feb 7th Put for an extra 15 bps vs the Jan 31?

Plus that would extend your time horizon more -- to be around the (1) one month time frame?

Also that IV is great as long as price stays flat or down. Is that a realistic bet? If so, isn't that (in theory) taking a directional stance?
More...

The 1wk ahead vol under static surface for Feb7 is only 15bps. With the Jan31 you have a little below 1pt in one week.

You are right that vol is correlated with mkt movement, but only 70% or so for indices, whereast delta has 100% correlation obviously (then you might as well buy/sell underlyer)
 
Quote from TskTsk:

If your purpose is to take directional delta bets, then yes, shorter duration gives you more delta sensitivity. But why not just trade the underlyer instead?
More...
1) more leverage with options
2) if the price does not move, the option position still shows a profit
 
Quote from ktm:

Mine are vertical, but I guess technically ratio spreads. I'm trading ES puts buying at 1:2 with the buy around the money, maybe a hair above and the sells about 20-25 pts down with 10 days or so til expiry. I can put these on for a small credit or flat. I'll take off the 2nd put in the $1 range and move the long put down 5 when I can do so for 4...(80% of max value).

Expiry yesterday worked out quite well as I had a 1845/1825 for about a $2 credit, then managed to move the long put down 3 times to pull out 12 pts. Obviously this is optimal and not every week works out this well.

For the 17th I had a 1850/1825 for a 2.15 credit. The 1850 has already been moved to 1845 for another $4, so I'm still sitting on that.


Obviously, I have stops in place should we have a big sudden move down overnight and this strategy really only works in this type of low vix environment.
More...

I am not I understand your spreads as discussed above. How did the current spread do today?
 
Today may have been a good day to test weekly spread trades.

Those who sell premium might have had visits to their trading accounts.

Something like:

+0.10 +0.10 +0.10 +0.10 +0.10 -2.00 ..........
 
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