Two questions: 1) Have you been able "buy back" credit spreads for $0.10 or less on a consistent basis. 2) Are there any brokers that will designate as an IC bear calls and bull puts that have different expirations. I wouldn't think so, but why not ask. So, if this were true I could place a Nov SPX bear call on top of my existing Oct SPX bull put.
Does anyone know of an option broker who offers options on the S&P big future contract? Any thoughts/suggestions are greatly appreciated. Thanks, traderanonymous
I was able to get out of my 1260/1270 call spread at $.10 earlier today, granted my spread is much closer. Late last month I closed a 1280/1290 spread for $.10 when the index was around 1215 that morning. Sometimes I get lucky, sometimes I don't. I have tried a number of times to get out at $.05 but haven't had any luck there unless very close to expiration. I closed the 1260/1270 so that I could roll down and scalp (as Coach is fond of saying) some premium next week while I keep a close eye on my 1160/1170 bull put spread. ryan
Ryan: What strikes are you considering rolling down to? Since I've got a corresponding 15 point spread bull put, I'm thinking the 1240/1255 might still bring about $0.50. QUOTE]Quote from ryank: I was able to get out of my 1260/1270 call spread at $.10 earlier today, granted my spread is much closer. Late last month I closed a 1280/1290 spread for $.10 when the index was around 1215 that morning. Sometimes I get lucky, sometimes I don't. I have tried a number of times to get out at $.05 but haven't had any luck there unless very close to expiration. I closed the 1260/1270 so that I could roll down and scalp (as Coach is fond of saying) some premium next week while I keep a close eye on my 1160/1170 bull put spread. ryan [/QUOTE]
I'm looking at the 1240/1250 but it makes me a little nervous as 1245 was a resistance point not too long ago. But now we are getting close to expiration I might change my tune, the delta on the 1240 is only .05 and is now about 50 points OTM (as I type this I am almost talking myself into it lol), not sure the premium will be enough to bother with though. I will probably wait until late today or even tomorrow before putting on a new credit spread, I want to see how the last hour goes today. I'll be up late tonight watching Formula 1 practice, I think I will wait and look things over then. ryan [/QUOTE]
Coach: As I understand it, you have an Oct 1165/1175 bull put spread. I'm curious to know if you adjusted that position?
Per Bloomberg: "Program buying kicking in shortly before the close..." That last half hour or so was wild! I stepped out of the office for a little bit and got back with about 30 minutes left to the close. The SPX had dropped 10 points. Watched it climb back fairly quickly but still end with a loss. My head is still spinning! When I walked back in the office I saw the SPX was under my warning level. After the move back up it was above. This market has shown some strength and volume to the down side. This last half hour shows that buyers may not let it drop too much farther. I will be looking things over closely tonight but I would say I am inclined to adjust and roll lower. Interesting to note that we closed just above/at the support level from late June. ryan
Well, we seem to be settling around that 1190 technical point I referred to in my previous post below. As a result I have not made any adjustments yet to my SPX or XEO position. Those of you watching your positions must see some crazy ass bid ask spreads and huge paper losses showing up. One of the downsides of this underlying is that the option prices go out of whack on large moves and your broker usually prices your posiitons to close at the bid or ask. Something you might have to get used to. 1190 seems to be holding. I am not saying I aint concerned but I feel better that we are closing above 1190 and therefore want to wait before making an adjustment. Here is my approach right now. For OCT I have about $12,550 in credits (less after commissions). I spent about $1,350 on that SPY butterfly. I am WILLING to spend as much of my credit as necessary to provide partial hedges (more SPY puts, SPX bear put spreads) to protect me against greater drops in the market. I am WILLING to even accept no loss/no gain for the month if I can hedge myself and get out. Therefore, tomorrow if the market starts dropping below 1190, I would be willing to spend another $5,000 in puts to make money on the drop to cushion the blow of rolling down my put positions. I would even venture to say that I would be WILLING to spend up to 75% of my credit premium to protect myself. I am not concerned with making money this month at the moment, I am concerned with not losing any money. SO tomorrow stay tuned closely because I might be a busy little beaver going long SPX or SPY or even OEX puts as a full sandbag wall assault on the flood waters coming my way. If OCT is a month with only minimal gains, then I did my job as a risk manager. If OCT is a month with $0 gains or loss I am still happy. If OCT is a month with a small limited loss, then I chalk it up as my 1 or 2 out of 12 and be happy that I acted to limit my losses as best as possible. Remember I am up about 20% with respect to return on margin. If I have to give back a net 3% or so while limiting my risk, then I am still positive and WELL above the market. This is the sacrifice you may need to make. Willing to give away the premiums for OCT to eliminate or drastically reduce your potential for losses and look forward to NOV. Risk Management! I cannot stress it again and again. If I have $12,000 in premium, then I will have no reluctance to spend all $12,000 to lock in a month with $0 loss or gain. If I do that I will actually consider it a success since I have my long-term annual gains to protect and end of the year return goals to shoot for. Your premiums might be smaller or bigger but the approach should be the same. As I said, 1190 is a technical support for a few reasons and it held today which makes me happy. But tomorrow is another day and 1180 is the next support level. With short strikes at 1175 I need to stay on top of this. Same with my XEO position. So if it looks red tomorrow, I go on a put buying spree and may roll down at the same time. I may also look into selling call spreads to keep premium coming in although I may not have much to choose from with such downward movement and may not be able to go to far OTM. However, even if I can only get $0.30 or so, every dollar counts as long as I plce those calls in a good zone (do not know what that is yet depending on tomorrow's move). So the rain is falling and my FEMA plans are in place. One thing to realize is that I am making this plan now when the market is closed and I am calm. Waiting until tomorrow might lead to panic. I have analyzed the 1190/1175 SPX put spreads and the 1190/1170 SPY spreads and will look at some more tonight. Ok folks, sleep well and remember that with a good risk management in place, losses are inevitable but not painful. Tomorrow our goal is to protect protect protect and forget about profits. Phil
Coach, thanks for detailing your plan, but.... I know you typically use 15 points between the SPX price and your short strike as a point to at least start considering adjusting. So when the SPX was down below 1185 (I think it may have gotten as low as 1182 or so), I don't understand why you didn't adjust. This was 7 or 8 points away. The reason I bring this up is because on the day of the London bombing the SPX price got within 13 points of my short put strike. I adjusted and the market slingshotted back up. Because there wasn't much time left before opex, I got stuck with a 1205 short strike on the bear call, which promptly got into trouble and caused a nightmare for me. I ultimately lost quite a bit. Still, I told myself that I planned the trade and traded the plan. I also practiced what I thought were good risk management techniques. While I made a number of mistakes, I thought I had done the right thing. Afterwards I learned that with only about a week left I probably should have lowered the 15 points to 8 or 10 before adjusting or just plain have gotten out. Okay, I learned something. But, forgive me for saying this, it seems like you're not following the plan that I've seen you recommend. It looks like you made the right choice today, but hindsight is 20/20. Please don't get me wrong. I and many others certainly appreciate your helping us with our credit spreads and I believe you are 100% right in promoting risk management over profit (at least month to month). But at the same time, it seems like you have to have a great deal of experience to make judgement calls when the price starts to get close to the short strike. As a relative beginner I wouldn't have that. If I had had an 1175 short today, I probably would have adjusted; most certainly when it got within 7 to 8 points of my short strike. So I'm not at all clear on why you didn't adjust. Thanks for helping me learn.
I hope I was clear about this in previous posts, but if not then I apologize. I will try and look through some of the old posts to see. I said that I use 10/15 points as the point when I make a decision whether to adjust or not based on what was happening in the market. I tend to lean more towards 10 points while others prefer 15. Although the market got down to 1181 intraday for 3 minutes, I decided to hold because 1180 was the next major support level for several technical reasons support after 1190 and I started to see some strength in the market coming in (I watch the live TICK indicator). SO I decided to wait and see if we could move back higher, if not I had my screen up to start rolling lower. I felt the combined moves were overdone and wanted to wait for a bounce. Happily in about 6 minutes with the TICK surging higher, the market moved back to 1185. And my comfort level rise even more when we jumped back above 1190. It took some balls to watch it move to 1180 and wait and see but the move lower was huge and I just felt we were overextended. I have been trading this strategy for a while so I am do my best to keep off the panic. Others may have decided to simply roll out as per the plan but my analysis did not convince me I needed to roll yet. I think I have said this a few times that the 10/15 point is where I make a decision to stay, roll down or close. Last month when the market hit 1241 with my 1250 spread I decided to roll. This time I felt I still had another support level to "protect" me and use as a last indicator and thankfully it held. I do not expect everyone to trade this as I would since I have my own approach. As you do point out I have a lot of experience so I traded it one way. Beginners, and I hate to use that word because I do not recommend this to beginners at all, but assuming you meant people newer to this strategy, may need to have stricter rules of when they will make adjustments. So bottom line I did not adjust because of my belief that we overextended to the down side and I wanted to see if 1180 would hold. Since I watch live 1-minute charts along with the TICK, I can get a live sense of sentiment and make decisions off that. I hope this clears things up. The distance from the short strike is when I get my warning signal to re-analyze the position and make a judgement call. Phil