So happend to study the SPX index on option month expiration, just to share some interesting statistics. From Oct 2005 to Sep 2006, there is more than 50% chance that the SPX closed on high on the option expiration date. 5 months closed less 5 points from the high of the month, 2 months closed between 6-9 points from the high. The study starts from the first day of the expiration month, for example in the month of Sep 2006, that was 21 Aug 2006, till the last day of the Sep trading day, that was 15 Sep 2006, there are 7 months from Oct 2005 to Sep 2006, that the index closed less than 10 points from the high of the month. Just to list the month in details (closing SPX price from the high of the option month): 1) Nov 2005 : 1.3 point 2) Dec 2005 : 8.5 points 3) Feb 2006 : 2.2 points 4) Mar 2006 : 3.2 points 5) Apr 2006 : 6.9 points 6) Aug 2006 : 0 point 7) Sep 2006 : 5.0 points To me, the above the statistics is not random. Does it help us in any way ? One usage is to might help us to close out our bear call spread one week before the expiration date if the index is still trending upward since the current statistics shows that there is more than 50% that the index will close on the month range high.
My diagonals are a work in progress so I wouldn't call them rules, more like guidlines that I keep tinkering with. I generally look to place a the positions at or a little beyond 1 standard deviation. I then look at placing a diagonal or possibly a calendar at or near the market to prop up the middle of the double diagonal. Need to do all this when VIX is relatively low as diagonals are a vega play not a theta play. Sep expiration was a bit of a nail biter as I was short the 1325 call (which was a good place to be). I held on because the SET would have had to have been approximately 1332 before I started losing money (the market closed on Thursday at 1316) with my max profit at 1325. Going to the close on Thursday I had a good profit in my diagonals and could have closed and been happy. I held on and improved my profit by a few hundred dollars by doing so.
Nice down follow through after yesterday's small pullback off the highs. Let's see if we just trade flat all day or it makes a decent move. I think we will bleed lower unless the coming economic data is not in line with expectations (i.e. even better than expected and thus we get a surge). Look for SPX to trade around the high for the next week or so with some pullbacks and attempts at breaking through..
Well, I got started with InvesTools in May 2005. I went to one of the 1-day 5-step classes for equities. I knew zip. I'm an engineer, not a finance wizard. But, I also deal/manage multi-Million$ projects, do cost analysis, vendor negotiation & management, plus some evaluation of roic, EVA, etc. My instructor was Michael Drew who also writes a column for Mike Coval and does SPX credit spreads. He had a short session on the end about options and spreads. It whetted my appetite. My total investment with InvesTools was about $400. I've spent more with Cottle since then. InvesTools can be a good start if you enter recognizing that 75% will be hipe. My wife attended and gained enough that we can discuss my trades and she can follow along with my reasoning. Education, regardless of the source, is what you make of it. I seem to have reached that point, over the summer, when I have learned enough to stop losing $ and since July have had either positive or breakeven months. I'm still learning. I'm far from the level of the regulars here, but I'm better than I was when I joined ET in May. Cru --- my $0.02.
OX recently switched to a new clearing agent. I contacted OX yesterday and they have now started giving margin relief on one side of a double diagonal. It is not automated yet, but once the DD position is established they said to contact them and the margin dept would release the margin on one side. They did not have a timeline yet for when this will be automated, but it is a welcome change to be sure.
I find that news strange because I had a lengthy discussion about this specific issue on the OX message board (search for double diagonals if you want to read it) and OX said that they required margin on both sides because it was an exchange requirement, they had no choice. Why would a new clearing agent change this issue? That is one of the reasons I transferred my account to TOS, but if the sale of TOS turns out to be an issue, it looks like I can go back to OX.
The reason for that answer was that it was the "new" requirement from GS, the OX closing agent at that time. Since then, OX has dropped GS and is now their own closing agent. Margin rules have now changed. They only charge for one side for an IC and similar trades. Check their website. The info is on their login page. Cru
Just bringing this up again so I do not have to dig for it UPDATE- CALL DIAGONAL POSITION Sold 135 SEP EW 1340 Calls @ 6.50 ($43,875 Credit) Bot 150 OCT ES 1360 Calls @ 5.25 ($39,375 Debit) Net Credit = $4,500 Max Theoretical Risk = $150,000 Current Return on Risk = 3% I shorted 2x as many SEP EW and added more OCT ES to even out the legs. I did so by shorting 135 SEP EW 1340 Calls @ 3.30 ($22,275) and buying 120 OCT ES 1360 Calls at 2.75 ($16,500) for a net credit of $5,775. New Net Credit = $10,275 Max Theoretical Risk = $270,000 Return = 3.8% [/B][/QUOTE]
Bump UPDATE - New Experimental Put Calendar Spread: Original Position BOUGHT 1 OCT EW 1290 Put @ 12.00 ($600 EOM Options) SOLD 1 SEP ES 1290 Put @ 2.50 ($125) NeT Debit = $475.00 9.50 -------> Short SEP ES Put expired worthless. Sold 1 SEP EW 1290 Put at 1.00 ($50) NEW NET DEBIT = $425.00 or 8.50 Looking for nice pullback in market for the spread to go up in value. If EW expires worthless, then I will sell a put in the OCT ES cycle and then look to the OCT EW cycle if needed.
Bump New Coach Phil Put Calendar Spread I still have my OCT EW/SEP EW 1290 Put Calendar running and decided to add another at some higher strikes to play a pullback: Bought 1 OCT EW 1310 Put @ 9.75 ($487.50) Sold 1 SEP EW 1310 Put @ 1.70 ($85.00) Net Debit = $402.50 or 8.05