I'm still learning. Is there some source that describes how to adjust and when. What would trigger an adjustment. My rule is to roll or close the short leg if SPX gets within 10 points. I was sweating my 1225/1235 Bull Puts Tuesday and yesterday. Is a 10 point trigger reasonable? [/B][/QUOTE]
There's a lot of information on this in the journal. But unless your MoMoney, it may be hard to find. I recommend that as you find information on your travails through the journal that you cut and paste it into a word document so that you can quickly reference it later. Typically for FOTM spreads, we begin considering adjusting when the SPX is about 15 points away from the short strike. But in practice and this is just my experience, it depends on the velocity of the market move and how much time to expiration. With a week to expiration maybe more like 10 points or so (but never forget about the SET; I've seen very experienced traders get buried by it). If the market is moving hard towards my short, I just get out of the way and live to trade another day. In practice with these FOTM spreads it's hard to move you short strike by more than 10 points per adjustment to another vertical spread and still maintain a net credit. Just my experience. Others will have other ideas. [/B][/QUOTE]
Chrdso I would be very interested in your spx strategy...I've noticed the same thing that often the credit for the next month really shrinks abt exp date...you might try it out...sm scale and let us know what you think...I guess the only negative is a long hard move upward and not really sure what your adjustment would be.
Chrdso: I'm starting to use a similar strategy. I'm putting FOTM positions on earlier and am looking to get out earlier. I'm looking at July now, but with this crazy market, I'm cautious. But with the SPX it can be hard to get out because of the b/a. I'll have to see myself how well this works. Still as Mo pointed out, I feel better about this timing strategy now that I know riskarb recommends this sort of timing (although he's not the biggest fan of FOTM vertical credit spreads).
[/B][/QUOTE] having experiences some close calls (and puts) I would say that you definitely want to be alert at 10-15pts but it depends on several factors...how much your total credit is...time to expiration...direction/tenor/tone of the market. Someone said that options trading is an art...in that there are many subjective ways to trade so what works for me may not work for you. and I've yapped enough for the nite...
Is there any corelation between SPX futures and SPX index?. Is that how our coach daytrades the E-mini?.
Optioncoach, I notice that you're 2 STD's below the market (puts only) when you open a trade. I generally try to go 1 STD but always on both sides of the market - the 'winning side' helps cushion the other side if the market moves too much. Also, on adjustments, I've seen a few different ideas. 1. When market approaches short strike (say your 10 pts), exit losing side then roll away or later month depending on available premium. 1b. Roll away at larger size (rolling for credits). 2. Use a long option hedge. Say market falls, you use some % of your premium received to buy long puts. It sounds like you use a variant of this method. Have you had better luck with this method than other alternatives? Would you share what else you've experimented with? Any comments on the above are appreciated. And thanks for your candor and comments!