I could not agree more with Phil's last statement. In the past, I have traded credit spreads and iron condors on individual stocks. While I often did make money, I also suffered some substantial losses. This included deep OTM credit spreads, which would bring in .20 credit. I would open several each month on differing stocks. Often all expired worthless and I'd return 10% - 20%, but then there would be a month when one stock imploded. I had this experience with companies like Schnitzer Steel, Net Flix, Career Education, etc. The trouble was that these stocks would gap and keep breaking down. One loss would literally wipe out a few months worth of gains. The indices provide considerable protections against gaps and breakdown. Sure, they can gap but they tend to be smaller in nature than more volatile stocks. The indices also trend down, but they tend to pause at areas of support rather than slice through them. The bottom line is that it is possible to adjust the occasional loser to minimize the loss. Often, you can still eek out a small profit. I still trade individual stocks, but I do not use the same strategies that I use for the indices. They are different games to be played by different rules in my book.
So I don't normally do this, I trade in my own bubble and don't ask for advice. But here we are, 4 days Exp Friday and I'm on the fence, so I figured I'd solicit some advice from my fellow SPX traders. SPX is at 1241 SPX IC 1260/1275 bear call (with in 20pts of 1260) 1160/1174 bull put OEX is at 574 OEX IC 580/590 bear call (within 5 pts of 580) 535/545 bull put RUT is at 679 RUT IC 690/700 bear call (with in 11 pts of 690) 610/620 bull put All of these IC's are within my "fence" range for adjustments, with the OEX being the closest. Would you just close out the top's of the condor's letting the bottom's ride? Close out the top's and roll up? It's tough finding premium this last week to adjust with, and I can't sit in front of my computer all day this week becuase I'm on the road. So if you have a sec, I'd like your advice.... Thanks, Shawn PS : Awesome fourm!
Shawn: I can give you my opinion but of course you have to follow that path that best suits your own risk aversion and trading style. AS for the SPX, the puts are quite safe in my opinion with several resistance points at 1225, 1200 and just below that. The calls are safe but without as much cushion. We have strong resistance at 1245 but if it is broken, then what is likely to happen is the market will burst through and pull back. Thus in 4 days, plus the Friday morning, the chances are certainly there that it could happen but as of today it still seems unlikely. I would be a little more watchful of the index if it breaks through 1245. Your OEX positions seems a little closer to the short strikes on the call side and may require more vigilence. The puts seem fine. I would maybe take some profit in the OEX calls if it existed or look into a roll up if the OEX inches higher. Those calls are within the warning zone and one good day could bring you ITM, while the SPX still has enough room. So perhaps an adjustment, profit taking or small loss taking is in order for the OEX calls. As fore RUT I have been out of touch with that index since May so I will refrain from possibly giving you bad advice there. Phil
I normally do naked puts but after reading this thread I wanted to do a credit spread . SPX was about 1240.82 put at 1150 was 1.90/2.15 put at 1115 was 1.05/1.25 I got 1 contract fill at net credit of 0.80. Please tell me how I could have done better. Comments much appreciated. Margin (overnight) required was GBP 1890 Thanks
I am not sure I understand the question or which month you are talking about. What better are you looking for? We all want more credit than we can get but we are limited by what we can pull out of the b/a spread. Your spread has a credit of $80 for a risk of $3,500. Not sure if the $80 is worth it given commissions. The spread is also wider than I normally would choose which raises your margin requirements per contract. I think 1150 is a good short strike but I would not recommend this strategy to do 1 contract lots unless you were just testing it out in a small increment. Phil
I am chomping at the bit lol. Decided that with 4 days left to go, I will just let these position go to expiration, especially after the adjustments. So Friday I will be looking for some nice OCT positions. I am looking at 1160/1170 on the put side and perhaps 1290/1300 on the call side. Phil
Thanks optioncoach for your reply. The month is Oct.The trade was with IB. I also wanted to learn how to do combination strategy with IB. I think the commission is 2.40 per leg. I have enough margin to do 10-20 contacts but I was testing how everything will come out. I am looking forward to your oct spreads so I can learn more.
I have now also done a credit spread on the call side, SPX at 1241.48 Oct 1300 call 0.70/1.00 1350 call 0.10/0.30 I got net credit of 0.60 I thought no margin would be required. but I have paid extra 2700 GBP. I donot understand this. Please explain Thanks
An Iron Condor is created when both sides of the position are the same distant apart with respect to the long and short strikes. Your call spread is 50 points apart but your put side is, I think, 35 points apart. This is not an IRON CONDOR and is treated as two different spreads and two margin requirements. In order to have one margin requirement both spreads must be the same distance apart. Phil