Coach, I've heard about locking the box but am still vague on the concept. Did you mean to say "buy the 1300/1305 bull call spread" (my bear put spread was 1300/1305)? 1.80+2.00=3.80 5-3.80=1.20 1.20*100=12k So lock it and let theta decay kick in till JUN exp?
riskarb, I'm certain there is wisdom in your post, just wish I could understand it.... what do you mean by "offset"?
Rally, good point. I'm really wondering though, if this channel has any meaning. The breakdown in NDX is severe, I wonder if we're in for a ride to SPX=1280...
I did not realize these were JUNE spreads. I thought you were playing a short-term dip in the market. The box is an alternative if you think you can get a better fill on the bull call spread that is OTM than closing the ITM bear put spread. Have to compare the two but with SPX the OTM spreads often have tighter spreads relatively. BUt since this is JUNE I would not box it up to JUNE, I thought you were looking for one more week. WHen riskarb says offset he means close the position outright.
well it only has a meaning in retrospect so i dont know what to tell ya however, since you seem to be considering the NDX as an indicator then it is getting close to some serious support so i dont know how much further downside there is unless some bad news comes out. if we are in for a ride to 1280 then fine, you will miss an opportunity if you close now for a small profit, but what if a bounce back hard here? just something to think about.
220x480 on a 5-wide SPX vertical? Yes, I call that absurd. That was the market in the 5/10 put bear spread when I looked at it this morning.
Coach, why would you not box it up to JUN? My inclination is to keep the position and wait and see, I expect SET to be lower than it is now, by JUN exp.
riskarb, yes it is ridiculous because it's so wide, but I meant to ask "why are the MMs making the spreads ridiculously wide"?
Boxing is the same as closing (offsetting) the spread. You lock in any profit or loss on the spread you had. There is no benefit to it outside of negligible fill issues - and is normally more benefiial done the otherway around e.g. you had an ITM debit spread that you wanted to close...but because of the slippage, you might choose to box it with an OTM credit spread instead. Oh and there is Pin risk too. I would point you to where I discussed this in detail earlier in the thread but I'm on my PDA so can't be bothered! It's all in Cottle MoMoney