SPX Credit Spread Trader

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

  1. It was going for $1 at 25 points OTM. I legged in on the swing. I normally dont like legging into spreads but today provided a good opportunity for this. Don't forget that this is the ES not the SPX, currently there's a 4 point premium built into the futures.

    Also, now that the ES EOM options are here, i will probably do more ES spreads than SPX. Just wish the multiplier wasnt 50.
     
    #6211     May 10, 2006
  2. scienter

    scienter

    Thanks coach,

    So the issues I may consider when using a wider spread are:

    1)Allows me to go alittle FOTM with a credit comparable to that of a 5 pt spread closer to the money (so a built in hedge of sorts, all things being equal)

    2) However because my spread is farther apart, I don't have the same benefit/protection of the long side like I do on the 5 pt......so if the market were to move strongly against my short weeks before expiration, I may actually have to consider closing out or adjusting my short sooner on the 30 point than the 5.

    3) So if I'm a trader with capital in the 10k range who uses the risk managment technique of just closing out my spread if it gets alittle too close to my short....and the event I'm most concerned about is a strong move with weeks to go in expiration (w/ a 45-30 d entry), then I'm probably better served with going with a shorter width like a 5 point (b/c the long provides me with more cover...then battling a short which has a rocketing delta with little protection from the long)


    Did I incapsulate your comments correctly?

    BTW, this has been extremely helpful. :)






    :) :)
     
    #6212     May 10, 2006
  3. mdshiao

    mdshiao

    Rallymode or anyone,

    Ask a dumb question. What is the margin requirement for one ES 1355/1360 bear call spread?


    Thanks,
     
    #6213     May 10, 2006
  4. 5 point swing does not a Battle make...

     
    #6214     May 10, 2006
  5. Thanks, you're good....:)

    Is there an advantage to rolling just the shorts to get more premium instead of rolling the whole spread (besides saving on comish)?

     
    #6215     May 10, 2006
  6. 30% in 5 months is not bad you guess? :D

    You are being modest. Cache, you've said this before i am sure but what is your max risk per position and your max drawdown so far?
     
    #6216     May 10, 2006
  7. I havent a clue but will place the trade in my paper account tomorrow and let you know. My current margin is at 7% of portfolio value, however i have other positions so it's hard to tell which is which.
     
    #6217     May 10, 2006
  8. Thats a really good question Andy....multitude of answers...if the long put or call is Wotm then you would get so little its probably not worth the mm's time....if you don't care about the BP or margin then you save some money on commish AND you have a better chance of hitting a mid price on a single (I've even had improvements). Sometimes it makes sense to buy the whole spread back and other times not, so I guess there is no hard and fast rule. Again so everyone is clear we are talking about closing or rolling spreads so far otm and also fairly close to expiration that ONLY the black swan can possibly dent it.:)
     
    #6218     May 10, 2006
  9. knucklehead,

    just saw your post and no disrespect but me could care less about losing up value on a potential FLY. :D

    I couldnt disagree more with ya and here is why:

    Per my previous example.

    1340/1345 bear call spread for $1
    1340/1350 bear call spread for $2

    You open 2 1340/1345's and collect $200.
    I open 1 1340/1350 and collect $200.

    The SET on expiration Fri is at 1341. You break even, i make $100. So who got the better spread? You see my point?
     
    #6219     May 10, 2006
  10. To me, a non-event is relatively little movement on low to average volume. The "even battle" would be represented by little movement on high volume.

    But at the end of the day, it appears you are correct. The volume wasn't anything extraordinary, so non-event would be the more appropriate term.:)
     
    #6220     May 10, 2006