The 1275 is a bit close but it is a little more than 1 SD outside of the market currently and could be a support area in looking at the chart. The current breakeven is about 1267 on the downside but this would move lower as the vol would increase on a downward move (unless we slowly bleed down then it might be a different ball game in regards to vol). Going to Oct 1250/Nov 1225 isn't bad either, more breathing room that way . On the upside my breakeven is right at 1 SD, might need to revisit that. Beige book comes out next week so that could affect things too, will wait and see. Don't have the margin to do this right now but just checking it out.
Don't forget that stdev is partly based on historical volatility which has been very low. This compresses what you see as +1 and -1 sigma. If/when the market activity picks up in Sept, what looked like a good 1 sigma bet in August may change quickly. This may be particularly problematic for a 1275 short put.
That's a good point. The diagonal does well with increasing vol but 1275 may be too close for comfort though.
NEW CALL DIAGONAL POSITION Sold 135 SEP EW 1340 Calls @ 6.50 ($43,875 Credit) Bot 150 OCT ES 1360 Calls @ 5.25 ($39,375 Debit) Net Credit = $4,500 Max Theoretical Risk = $150,000 Current Return on Risk = 3% ANALYSIS 1340 is the year high for S&P futures and we already have had an impressive run up from Summer lows. I think we will move sideways most of September or at worst test the highs but I do not forsee us making new highs on strength, especially with a 9/20(date?) Fed meeting looming in 3 weeks and lots of traders coming back from vacation after a move higher on lighter volume. Maybe they will profit take or churn the market for the next 2 weeks. If the market does push higher over the next week or so, I can sell another 15 SEP calls and push the credit higher.
Coach: Hope you don't mind but a couple of newbie questions: How does the ES and EW futures equate to SPX. Since I do not trade futures yet, I am curious to follow your trades with similiar positions on the SPX. Also, how did you manage to obtain the initial credit. Did you leg into the position or placed it as a spread. What would be a similiar strike selection for the SPX. Thanks in advance for your answers.
1. Did you follow your trading plan? 2. If so, do you want to change your trading plan for such situations? Sounds to me that you are upset with yourself because you cannot guess market reversals.
Coach, Is the the EW the options that expire at the END of each month? I had a look at them in IB but there virtually no volume traded on them even though there is a bid and ask. Do you just trade the EW at market ? (ie buy at the ASK and sell at the BID) Thanks