SPX Credit Spread Trader

Discussion in 'Journals' started by El OchoCinco, May 17, 2005.

  1. just21


    What broker are you using?
    #31     May 18, 2005
  2. Good question!

    Try and get a $0.75 fill on a 5-point bear call spread on the SPX... will never happen. I use the 15-point spread to be able to get the bigger credit. I usually choose long strikes 15 to 20 points apart as my goal. That is because with those spreads I can do a large number of contracts to get my high volume.

    I will go wider than 20 points but I like the 50 - 100 contract order and that is why I choose the spreads I do. This is a personal preference only of course.


    #32     May 18, 2005
  3. OptionsXpress. They will be adding futures and futures on options soon so I will consolidate other money from Interactivebrokers. Both of these are among the two best for large trades (OX has a large trade discount which brings it commissions close to IB for options).


    #33     May 18, 2005
  4. MTE


    I wasn't implying that you should try to get $0.75 on the 5-pt spread, but here's what I meant:

    When I looked the quotes they're as follows (mid-points):
    1230/1235 - 0.35
    1230/1245 - 0.9

    So, instead of one 15-pt spread for 0.9 credit you can do three 5-point spreads for 3*0.35=1.05 credit. This will give you the same 15-point spread and 3 times the volume, which you want to get your high volume.
    #34     May 18, 2005
  5. Ok now I see what you are getting at. The only problem is that I do not always get the exact mid-point and even harder to do so on 5 point spreads. For my 15 or 20 point spreads, I start there but have to shave off a nickle or dime.

    On my $0.75 spread fill the bid ask for the spread was about $0.45/$1.40 and I had to shave off the mid-point to actually get the fill. If the mid-point is $0.35 on the 5 point spread I will most likely get filled at $0.30 or $0.25. But I have found it harder to get these splits on 5-point spreads than on the 15 and 20 point spreads.

    Now it may just be my experience so you can go for the 5 point spreads. I will try a few based on your post but as I said I had problems getting filled in the past.

    Also 3x more spreads is a lot more commission for only a 1% increase in my profit on teh same margin. Using your mid-points the 5 point spread has a 7% return while the 15 point spread has a 6% return. Commissions on 50 contracts v. 150 contracts for same underlying margin will probably reult in similar returns after commissions are taken out. But I have had trouble getting those tight spreads filled.

    So if I can get the fills on the tigher spreads I will look into them. But higher commissions for same margin and slightly better return (1%) is not enough to change my mind yet.

    Thanks for the question. I will look into the 5 point spread orders again and see if my experience changes.


    #35     May 18, 2005
  6. Gonna test the 5 point spreads again using the 1230/1235 for JUNE which is currently showing a spread b/a of $0.10/$0.90.

    Put in an order for 100 at $0.50. Will let you know if it gets filled or if I have to shave to $0.45. If I can get filled then I will start looking at the 5 point spreads again. Thanks!


    #36     May 18, 2005
  7. MTE


    No worries.:)
    #37     May 18, 2005

    I have the wrong trade info for my new SPX Bear Call Spread. I actually got filled at a higher price than my limit- go figure!. So here is the actual position according to my trade conf.:

    55 JUN 1230/1245 Bear Call Spreads @ $0.80.

    Credit = $4,400
    Margin Risk = $82,500
    ROM = 5.33%

    Sorry for the mistake but the above is the actual trade that was opened today at 1:28 PM.



    P.S. My 1230/1235 attempt sat there for 45 minutes unfilled at the mid-point and even with $0.15 shaved off. I just cannot get good fills on 5 point spreads. Sorry MTE :(

    #38     May 18, 2005
  9. MTE


    No worries, Phil. Just a thought.

    Good luck with your trade.
    #39     May 18, 2005
  10. Added a JUNE Bull Put Spread. Given that it is less than 30 days to expiration, it is hard to get a good credit far enough out of the money but I found some after waiting a long time to somewhat split a b/a.

    New Position:

    SPX @ 1188

    65 JUNE SPX 1110/1125 Bull Put Spreads @ $0.75 (b/a .15/1.55!)

    Credit = $4,875
    Margin Risk = $97,500
    ROM = 5%

    This trade, using delta has about 90% chance for profit. 1125 is a slightly higher strikes than I would have wanted to take but given that it is about 63 points OTM with 28 days to expiration I like it.

    Remember I also have the following position open as well:

    55 JUN 1230/1245 Bear Call Spreads @ $0.80.

    Credit = $4,400
    Margin Risk = $82,500
    ROM = 5.33%

    I am saving some margin to enter into some JULY positions at the beginning of JUNE in about a week. With JUNE expiration closing in, there is not enough credit far enough away to load up on so I will take these two positions for now to get some premium for JUNE and then after Memorial Day, focus on JULY.

    #40     May 19, 2005