Ahh OK we finally got the right strikes lol. RIght now the 1650/1665 has a b/a of $2.80/$3.60. If you received $2.50 then so far not a major loss. The market did pull back some from its high and I do agree we are a little overbought. I saw the SPX hit resistance and pull back and close under 1220, just barely though. I do not expect any strong up day tomorrow absent any major tech company news so you might get some profit taking. Either way, you should begin to keep a tight reign on the position so that worst case scenario you take a limited loss as opposed to a much larger one. Adjusting up is not really an option given the fact that there are not many strikes much higher (a downside to using the NDX for this strategy). One thing is to set up two different risk management stops. The first is at the long-term high you keep referring to. If the market breaks that high, then it will most likely keep running higher. You can decide to hold on unless that high of 1629? is broken. This way you have a clear signal to hold or get out with a limited loss. You could also set up a predetermined loss limit and decide that if the spread vlauye reaches X, you will close it out. So if your $2.50 credit spread cost $3.75 to close you get out. I think you still have room between now and 1629 but my advice is to use an option calcuator and plug in the NDX values using current IV and then move the NDX to 1629 and see what the price of the spread will be. This way you can know in advance approximately how much you might lose if you use 1629 as your stop loss level. Phil
I believe that places with people on the floor trading SPX will get you better fills then simply placing a limit order with your broker and letting it sit because they are right on the front lines and can find the MMs which can tighten the spreads for them and get filled. But if you use a broker that has people on the floor and you can access them, you can still get the same benefit. I have called Thinkorswim a few times and asked them to help me get a fill on a spread and they called down to their guy on the floor to help get it filled. To test I placed the same orders at OX and Tos at the same price and ToS got it filled when I called in 5 minutes and OX did not get it filled at all until I lowered it another $0.05. Big difference considering the number of contracts I do. My advice for these spreads if you are going to do nice volume is to go to ToS (tell em Coach Phil sent you, great bunch of guys there) and call the trading desk to place your spread orders. Nothing will beat major institutions with guys on the floor bu in my opinion, Thinkorswim comes pretty close for us retailers. Phil
Well, I ended up going long a 1255/1265 call spread at .40. Only did 10 contracts, and it is only a third or so of my profits that I have closed out in the last couple of weeks. It is good to see how the other side lives, but for some reason I feel like I just bought a lottery ticket.
Coach, How about using, say, 20% of your DEC credit and buying some SPX 1250/1260 (or something like that) bull call spreads?
Phil, Do you know where I can find a free options calculator to calculate option prices? I'm just want to play around with it, and use it for what if scenarios when SPX approaches short strikes. Thank you
Actually, With 13.9% volatility, the probability NDX finishes below 1650 (my short Strike) is 76%. Is it worth waiting? Cheers
OX should give you the realtime IV for the specific index. Actually it's 14.29 from OX. The 13.9 is from another site and it's from yesterday close ; they update it every other day. So the real IV for 1650 NDX is 14.29 as of 6.52PM today