It's much easier to get decent premium when expiration is about 7-8 weeks away. With only 5, it's much more difficult. Good luck. Mark
Mark, Do you get better premium doing this and rolling into the following month 2-3 weeks prior to expiration?? Flint
No. I don't roll unless forced to do so (short strike breached). I merely carry positions in two different expiration months at once. For example, I filled my quotient of Oct/Nov spreads 2-3 weeks ago, using half the capital I devote to diagonals. This past week, I began opening Dec/Nov spreads. I intend to sell the remaining Dec/Nov spreads as soon as possible, now that I have more margin room (after Sep expiration). Mark
Hey Mark - Are you still posting over on the yahoo boards? If so which one? I sort of lost touch with everyone i was following with the change to the new format...
Credit Spread Traders vs. SET Just wanted to say thanks for keeping the update updated. I added an absolute difference column, and then calculated the MEAN of both. Interesting find... very helpful for those last few holding days into expiration. Let me explain. The AVERAGE of the SET Diff was -.76, of which someone may interpret as "there tends to be little change from Thursdays close until Fridays open.... ie. little effect". As traders, we're not concerned with the 'average' as much as we are the 'actual movement' from the close, which in this case is the MEAN of the Absolute Difference. The Mean of the Absolute Difference turned out to be 6.28, which would better represent our expected movement upon close from Thursday to open on Friday. As credit spread traders we're concerned about the absolute movement because our positions are risk based on the movement. We really don't know the direction, so it's the magnitude of the movement which is relative for us... especially going into the last day of expiration. Therefore, based on the data presented in the spreadsheet, we should expect around 68% of the time the closing PRICE to be +/- 9pts. from Thursday's close, but we should expect an average movement of atleast 6.2pts. I sure hope I haven't confused everyone now.... just thought this might help some of you determine your adjustment ranges and panic holding tactics for your credit spreads. For Diagonal Traders.... you can throw this away! Murray
Thanks, for the update Murray. I've downloaded your revised version and will keep it updated in the future.
The attached 9-yr table shows the relationship between the typical Sept/Oct drop in the SPX with the fed meeting that occurs during that time period. Fed meeting this year is on Wednesday of this week.
Interesting table....I did notice some of the drops began prior to Sep expiration so I'm assuming the total of the drops could have lasted past Oct expiration. It is certainly more ammunition for the bears this time of year are you doing any bear call CS's?