Took advantage of a nice down day and the fact that the S&P seemed to hold support to add another put spread for SEPT: SPX @ 1225 Sold 150 SPX SEPT 1140/1155 Put Spreads @ $0.55 (.10/1.35) Credit = $8,250 Risk = $225,000 Return = 3.67% I am staying on the put side for now given the continued support and upward trend of the SPX. Also, there is short-term support at 1225-ish, 1200, and perhaps 1175 so I think I will have plenty of time decay before the market pushes me out. Since I am in two different put spread positions I can always add calls to leg into IRON CONDORS to wihtout additional margin. This will boost the expected return on the spreads as I take in more credit with no additional funds at risk. Below I am attaching a technical analysis chart of the SPX to show the upward bullishness I am seeing in the short-term. Phil
Phil, Hard move down today. I think there's going to be more of this for a number of different reasons. Anyway, the 1165/1175 put spread went negative today. When do we start worrying about it and taking some action -- buying SPY hedges, taking the spread off, adjusting, etc...?
A down day does not change any of my previous risk management rules - adjustments only if the index moves within 15 points or so of my short strike. SPY hedges can be added at anytime but definitely not today when the SPY puts will have swollen in price. If you are concerned then you can wait for an upday to grab some SPY puts. However, we have another strong level of support near 1200 and some people have been pointing out support levels near the current levels. So without a major catalyst the market, if it will contonue to move lower will slinky its way down, allowing time decay to start kicking in soon. An end of the summer vacation spell will mean some quiet days as well. One person I spoke with said the volume today was not significantly higher than normal indicating not full abaondining of ship yet. Phil
"A down day does not change any of my previous risk management rules - adjustments only if the index moves within 15 points or so of my short strike. SPY hedges can be added at anytime..." -- yes your risk management rule about "do nothing until 15 points to short strike" is crystal clear and I suppose it takes discipline to stick to it at all times. Do you have a rule about the SPY hedges?
Coach Phil...I wish to thank you for posting your trades on ET...learning your strategies can help all of us be better, more profitable traders. I just finished a TOS presentation by Don Kaufman...the trade centered around the SPY and the IWM ...doing IC's , using the TOS platform...AWESOME ! I believe they're using the SPY for a lesser margin required on their trades...but still bringing IN Premium....anyway, thanks for sharing your expertise with all of us....regards & gtty..... traderkip
I am studying the use of futures and options on futures on the S&P as not only hedging tools but also to increase my returns. Right now OptionsXpress is not allowing futures (only on individual accounts for now and mine is in the form of an entity) and options on futures are not available yet. I will be putting together new funds next week and I think I may have to put that money at InteractiveBrokers so I can take advantage of options on the E-mini as well as futures. When that fund is up and running I will include some info on e-mini options and futures. But I find using the E-mini options and futures to be a great addition and provides another means of risk management for my SPX positions. Phil
Thanks Kip! On another discussion group I have heard a lot about TOS and their Iron Condor approach on the SPY. MY personal preference is still for the SPX given the strike choices but if using the SPY is bringing regular premium and risk is managed well, then nuttin' wrong wit' it! regards, Phil
Phil, "I am studying the use of futures and options on futures on the S&P as not only hedging tools but also to increase my returns." -- So am I. So far, I've found that using futures as a hedge is not good because your losses can grow to well beyond the amount you were trying to hedge. But options on futures provides a great hedging mechanism. But how will you actually increase returns?