Well thanks to wide b/a spreads I could not get out even though SPX went to 1365 as I had stated. I did not think it would run there that quickly and hoped it would wallow there a bit but instead it ran there and boucned off pretty fast. I am trying to get out now since it seems support has held.....
It seems to me that we have to close a CTM vertical at a right time (usually before expiration). That means we suffer from two slippages (or two b/a spreads). However for FOTM vertical, you usually hold it till expiration and so suffer from one slippage.
This is true. The problem with FOTM is that the slippage to close out before expiry eliminates a good portion of the paper gains. With a CTM spread it is rather small. Just a word to anyone wanting to sell CTM spreads. I usually have to close them out one leg at a time if I want to avoid significant slippage.
That's one of the reason I don't particularly like SPX (too much slippage on adjustments)and trade the RUT instead. Not perfect, but tighter b/a. Of course, percentage wise it is more volatile.
I also trade mainly RUT. Though it has a tighter b/a, its still hard to get the mid esp when it is close to expiration. Being more volatile, it has a lot more premium when compared to SPX.
May I know is RUT also stop trading on the third thursday? Is it european style? Is RUT CBOE product which has cash settlement also? Thanks.
HUGE REAL upside volatility!? VIX was at about 11% end of Sep, which implies a 1 standard deviation move of around 3.15% (0.11*sqrt(30/365)) and SPX was around 1340 at that time. So that translates into about 42 points. Over the next month SPX moved up by around 45 points. Doesn't look like HUGE volatility, just a normal 1 st. deviation move.
Now that you put up the objective data and taken the subjectivity out of it you make a darn good point. My problem was I only enter the SPX at the tail end of the prior month of the current options period and my VIX numbers span two calendar months. From my perspective we had over a 60 point volatility to the upside during Oct expiration with a 7 point gap up on SET as well. It was a killer for IC players who started out 50 points out of the money and did not get much premium. We often had to ride the roller coaster of 1% daily swings up and down. Weee - such fun to be on the tip of that market whip as it lashed back and forth at both bears & bulls with the bulls dominating... TS