When SPY Sells off 5% in Two Days

Sellers of Credit Spreads got creamed - The steamroller flattened all the pennies, yearly profits most likely gone.

 

I actually thought I would get killed, but legging in and out of positions, I’m seeing a gain of 2% on my account with credit spreads. The art is in being flexible, I guess!

 

There are still better strategies out there (besides take a look at a few of the casualties from 07-08), lots of guys happy to try and make a few $'s selling those far OTM spreads...it's like having a bullseye on your back and most guys hedge post-facto...if you're just legging in and out and doing that well, then you can do a lot better than just credit spreads.

 

I don’t trade far OTM spreads fyi. And I have multiple strategies.

 

ok, but then I'm guessing the risk profile doesn't look like a stand alone credit spread...

 

Yes. But one of my positions was short a put spread, and despite the rapid selling and being completely ITM when i closed, i paid 17.25 for a 30-wide. I know that vols helped, but I thought it would cost me at least 20. So not as bad as I expected. It was Sep also, so still some time left.

 

presumably all of the skew in the further otm strike...

 

By further otm strike, do you mean the highest? Because in that case, it would have been more expensive... Remember, the put spread was above spot, and i was buying it to close.

 

Thanks for deciphering it for all of us. We would not have known without you. ;-)

 

cdcaveman, are you saying a trade such as go short (in the SPY) the 190 call one or two weeks out and go long the 190 call perhaps four weeks out?