For me, it doesn't matter 45d or 30d or 15d. I enter when ythe technicals dictate me to do so. Don't forget, entry is key in this game. You may have entered 20 1340/1350 @ 0.75 45d to expiration you get 1500. I enter 10 1340/1350@1.50 . We get the same total premium but I got 1/2 of your contracts I still have plenty of cash and I may go fishing for some late call/put spreads in the next few days. There will be volatility in spade in the next 2 to 4 trading days due to employment report (Friday) and Bernanke (sneezing) on Tuesday and also Maria Batiromo changing underwear could bring volatility. There is still money to be made in may. MHO
I also see no need to rush into anything at this point for the following reasons: 1. SPX is right in the middle of the trading range. 2. Fed meeting next week. riskarb -> why would going for 45d->15d be better than going for 30d-->0d?
I think it was to you in that since you are fully committed for MAY, if a JUNE oppportunity arises, rather than waiting for a couple weeks for the MAY positions to play out, you could just roll them into JUNE and capture the current unrealized profits. Not a bad strategy depending on what your MAY spreads are valued at right now.
Of course you'd be giving up the time period when theta works the fastest. But if your spread is only worth 0.05-0.10 then it could be worth capturing the extra June time value.
It was a response to everyone participating. I won't make an argument for taking direction/timing, as I don't agree with the methodology, generally. The 45d/15d rollover has a better R/R w/o the gamma risk of the 30d to exp play, that's all. The variance on execution exceeds the credit remaining with < 15d to expiration when trading 2sigmas otm. I think you would be pleased with the 45d/15d strategy. Regardless, I don't recommend either, but I am happy to see you all doing well.
I have limit orders to buy both side of the IC for $0.05 which is about mid-point so I will see what happens. I suspect we will turn in place until next Tuesday so I may have a better chance later on this week or Monday. Will update if I am filled or if I decide to move it $0.10 but I doubt I will give in . The IC was opened for $0.60 so I could most likely get out today with a net $0.40 credit but with so much cushion I might see if I can get the $0.05...
Good points, but what about a recommendation to those of us who position ourselves only 1sigma (or slightly less) OTM? With 15d left on these positions there is usually significant premium left to claim. Also this dramatically changes the r/r. What do you think?
>With 15d left on these positions there is usually significant premium left to claim. How well do you sleep at night during the last week of exp? Stepping in front of a bulldozer to pick up a dime, or a dollar. Same feeling of fear for me. Remember that the margin is still the same. As Dan points out, your **ROI** is better served by moving on to a new month.
I don't refute there is significant $prem left. Simply that the execution risk as a % of $prem is extraordinarly high. The gamma value for deep otm positions with 15d or less is small, but increases much like an exotic barrier touch option when spot approaches either strike. Maybe run 50% of your allocation at 45d, the remainder held for opportunties with 15d to expiration. You're limiting your exposure by 50% with a similar decay profile.