No doubt my current position has gotten buried in the great discussions but I already opened a FEB position some time ago: - 125 FEB SPX 1190/1205 Put Spreads @ $0.45 I was looking to see if I would add more on the down draft yesterday but nothing looked too appetizing and I already had $187,500 in this position so I figured I would just let theta bleed in and sit back and enjoy. Remember I said I have the slow approach to the first quarter so I am picking off the easiest trades I can find and just letting them run.
Oops I misread your original question! lol. I have not even looked to tell you the truth due to all the bullish confirmations we have had. Despite yesterday's drop, the bulls came back at the end and pushed as sharply off the lows and we have a nice small move higher today so far. I might browse the chains but still hesitant to get in front of the market with 30 days to expiration.
I just joined this messageboard.I must say i am fascinated by this style of trading(month to month condors and spreads). I am also glad you shared the prego fly repair strategy. what i would like to know is how do you decide what strikes to open when deciding on a trade.Is it based on how many levels of support you have in between or based on risk/reward or something else?. thanks in advance...
This is a great question since the criteria I use for selecting strikes has gotten buried and is worth bringing up again. Give me a few minutes and I will post the guidelines I use.
Coach, I don't think I need to worry about SET. As of 9:05AM Thursday, I am 25points away from the short on the call side and 20 points from the short on the Put side. I have 1305/1315 and 1260/1250 total $1.05 credit Should I worry about it? Or shoud i trade for 0.05 debit where possible?
I do not think SET is an issue for this Friday morning opening being that far out of the money as long as that cushion you have is not reduced. If you move below 15 points OTM, give the nickle back to the MM and walk out proudly.
My approaches for strike selection: I am always studying the charts of the S&P and following it. I study support and resistance, trendlines and moving averages to give me the best picture possible of what is happening in the market. Basically I look for option strikes that are outside support and resistance, have short strikes with deltas of 0.10 or less, currently I average around 60 - 80 points OTM. An additional guide recently discussed was taking the ATM straddle and doubling and adding and subtracting that value from the current index value as an approximation of a 2 sigma move. Combining all of these together is how I choose my range of strikes. As for returns, I live for 3 - 5% based on the premium/margin at risk. Most of the time I am in the 2 - 3% range depending on time to expiration. If you look to strikes based on the criteria I mentioned above then you will really aonly be able to get 2 - 3% on average. If you choose to do Iron Condor, then returns can be 5 - 10% or more. It is kind of hard to blindly select strikes. Since I follow the S&P so much I also get a better feel for past support and resistance levels in guiding me in strike selection. My decision is usually biased towards put spreads due to the IV skew which allows me to go further OTM to get my % returns. I also base my decision on market conditions. For example, since we are bullish for the year to date, I am only in put spreads. This is just a general overview but sums it up nicely. Everyone here adds their own experience and risk tolerance to refine the criteria to better suit their own risk and trade management. I mainly focus on spreads of 5, 10 and 15 points with no clear preference for either. I usually land in the 10-point range. This strategy has significant risks and should not be ignored. Hope I did not leave anything out lol.
RDEMYAN: I think I may be tempted into some bear call spreads to add to my puts. Why? The 1350/1365 call spreads have a b/a of .15/.40. That seems quite far OTM for me giving the slight headwinds that keep popping up in the market everytime we get going. Although I still see an uptrend, I do not see us getting even to 1330 really by FEB expiration. Will try and get filled at $0.25. Not a great credit but since I already pocketed $0.45 it does add some nice change and return for the month.
Coach: I'm glad you said 1330, because I just got filled on a 1330/1340 bear call for February for $0.65. Might be a little close, we'll have to see. I still want to take on one more bear call position and the one you suggest might be good for me at this point given that my 1330 is a little closer than I usually like to get.