I have been trading on a daily basis on the NDX but my success seems to be stunted lately. I would like to place longer trades like 2 to 3 weeks out. I have been reading your posts but am still a little confused on something. I know that the opening print on the day after the indices stop trading, is what I need to be concerned with. However, if I sell a PUT credit spread and the index drops to near my short strike, should I close out or wait until the opening print? I am trying to figure out what to do with cash settled options since they are not as equity options and so I cannot just wait to make sure the stock closes above my short strike. Any help is greatly appreciated. jwdoucet
For these index options that stop trading tonight, the underlying indexes may very well settle at different prices the next day from where they are tonight. The indexes also settle at a different price from the opening print. They don't go off of indications of each security. They get the opening print of every security in the index and usually price about 11 a.m. Ask your broker for the settlement symbol. Whether to close or not???? If the index is above your short strike towards the close I would let it ride until the a.m. If you close, that's a guaranteed cost. If you wait, it's just one more day of the same patience you've had for the last 3 weeks (if that's when you wrote the spread).
If I go long a Condor on NDX and receive a credit, do I want to wait until the opening print? If the NDX closes the night before at $1589, how do you know where it will be on the opening print the next day? It seems to me that I could be wiped out completely the next day with a surprise opening. I'm just trying to get an understanding. Thanks in advance for the help.
You are right, you could could get burned by a low open. If you're comfortable with the return you have after the cost of buying back Thursday afternoon...and it lets you keep your sanity on Friday....by all means close out. We all know keeping the sanity is a lot more important than a few dollars sometimes. BTW, the settlement symbol for the NDX is NDS. The scenario we talked about happened this morning. NDX opened at 1591.92 but NDS priced at 1574.57.
See the problem I have with the whole thing is that the options don't appear to decay like the ones on normal equities. Therefore, I could by an option now and it looks to me like 3 weeks from now, the option could still be pretty pricey if not more expensive. I'm actually trying to figure out how to place CREDIT spreads on the NDX or SPX, like I do with equity options.
I would suggest not writing so close to ATM. There's premium further out of the money with indexes than there are with equities. Check out this journal thread for some REALLY good insights into index trading. I could read this all day: http://www.elitetrader.com/vb/showthread.php?threadid=49586