Just a quick note, that a credit spread service I subscribed to, PM me if you want the name, did this exact same approach. For example if they reccommended a bull put 1180/1170, after the order was filled, the next day they sent a Xecute order to OX saying: close the spread at the market if the spx = 1180. This "trader" would always get out of the position. Now I know there are a lot of problems all of us intelligent people could come up with using this approach, but it at least protect's you (hopefully) in a major event when your not at your computer. On another note, I feel strongly that you should be connected to your trading account 99% of the time, so I've used the cell phone web service from OX, and it's works great. You need to have multiple things in your back pocket just in case. sd
ok so 2004 there were 4 months with down sets...DEC Thurs 16th close 1203.21 set was 1190.45...(I remember how sucky Dec was) Aug was less than one pt below set 1091.23/1090.65, June another small down 1132.05/1129.50 and Mar 2 pts down...my question remains WHY are so many months UP months???
Attached is a spreadsheet of all the historical SET prices and the corresponding SPX market close prices. It's rather interesting and scary. Murray
Murray: Thanks for the post. I've been moving towards a strategy of not holding on to my positions to expiration and your spreadsheet has confirmed that I'm doing the right thing. 45 point difference in September of 2001 (5%) is unbelievable?? :eek:
I wanted to see if there is a way to put more money to work on credit spreads without increasing risk outright. Well, there isn't, but the following might be an interesting step in the right direction and I'm requesting some feedback. The Problem: I haven't been thrilled with the credit received for safe, far OTM spreads with 30 days to expiration. If I want to get a decent credit, I have to go closer to the money than I'd like to. Now I've read/heard several times that it is "safer" to go out 2 to 3 months such that the spread can be farther OTM than a 30-days-to-expiration spread. Mathematically, this does not make sense but intuitively, it seems safer. Why? So here's the thought. Instead of using 50% of capital (as margin) on a 30-day spread each month, put 35% on a 60-day spread. One month into the 60 days, put on another 60-day spread using another 35% of capital. You are always 70% invested and even though you have 60-day spreads, you have an expiration event every month. You can do the same thing with 90-day spreads using 25% of capital each month.
Good explanation. I like the iron butterfly approach too depending on how sideways things are looking and then adjust or build from there into ICs or other positions as the market dictates. Otherwise, just take one side of the position if things are not so sideways. Again, concur with your approach of taking quick profits. I usually try to look at annualised returns to compare if the quick turnaround betters the corresponding holding to expiration bet. Btw, is your SPY strategy automated in anyway? And have you looked at SPY vs XSP? Just curious. Momoney.
Agree, but alas for some people this is just not possible even with mobile access. Do we say to those people that they shouldn't be trading? It's a tricky one. I'll let you tell them Don't want to start an OX vs ToS debate, but the thinkAnywhere platform for PDAs kicks ass! See here: http://www.thinkorswim.com/tos/displayPage.tos?webpage=wirelessPlatform Add to that some basic analysis: http://www.optionstar.com/ss/osce.html and some charting if you're into TA e.g. http://www.fis-group.com/pocgen.htm ...and you're good to go! Have submitted about a million or two feature/improvement requests to ToS so hopefully next version will be all singing and dancing. Momoney.
I think SET was the least of people's problems that particular month. The problem with credit spreads/ICs is that they often really only reveal their best profit potential as expiration nears. This is due to theta blah blah blah... So, the question becomes, when is the optimal time to take off/roll a position that is short options/gamma? The answer is probably subjective but some of the contributing factors are: 1) Settlement procedure e.g. SET 2) Any large arbitrage activity. 3) Black swan protection. 4) Profit potential. Why do I mention black swan? Well if you trade a European style exercise product then you have a chance of recovery after a Black swan event, but that recovery might take a little time. If it happens on the Thursday of opex week then you don't have as much time as if it happened on the Monday. So routinely taking off positions on the Monday would cover you for a lot of cases...but then often miss out on the best meat of the profit. This is all stating the obvious I think and yet another balance of risk/reward. So what is the consensus on best day of week to take off/roll positions? Momoney. PS After all of my SPX bashing, I'm going to give it one more chance (thats about 8 and counting) and see what there is going on today. The market makers better treat me nice or I'm not going to play anymore.