Credit Spreads

[TinGull]

Currently working another SPY order (yay volatility)

158/160/141/139 IC for a .52 credit. I'd be really surprised if I get a fill on this, but wanted to put it out there just in case. It's a really nice ROI for a *kind* of riskier play with the short call being at 158. That'd basically be putting the SPX at 1580 and with what looks to be a failed break attempt in the SPX, I do feel pretty safe with it.

[TinGull]

And filled at .49

[Reaver]

Good stuff Tin.

[TinGull]

Love credit spreads...making money when the market's down.

As for how I'll adjust these spreads...when any leg of an IC is .10 or less, I'll buy it back. No sense in having a gain and letting it potentially turn into a loss for a wimpy 10 cents more.

If price comes down into 1.50 - 2.00 of my short strike, I'll look to close out the short strike and hold the other IF there is a lot of time left to expiration AND there seems to be more potential to that side.

If we are inside of 10 days (calendar days) until expiration, I'll look to close out the trade. No sense in taking an un-needed gamma exposure coming into expiry.

Weekends are the best, because time decay is working for you while the markets aren't even open. Gotta love that.

Current market situation :

[TinGull]

Right in the middle of my sweetspot as of todays close. Very nice and am lovin' it. 2 weeks to expiry and these trades could be closed out next friday. Currently sitting at around a 10% gain on risk, looking to make up that next 10% in the next week.

[TinGull]

Another great day for time decay! The SPY position is sitting real nice and pretty, and I'll be putting a position on the IWM hopefully monday for a fill. Currently working a 88/86/72/70 Iron Condor with a wicked sweet spot. Overall the vol puts me at an 80% chance of expiring worthless come DEC expiration. Is this a beautiful trade? Absolutely! At a .75 credit, this is giving me a return of nearly 52% on the risk. Totally cool. The current mark of this spread is sitting at .71, and looking for a little rise in IWM Monday to give me a fill in the AM.

[brownsfan019]

Tin,
I really like the idea of these credit spreads. I mean, I find that many of the candlestick Support/Resistance areas that I find are often respected, so this would seem like an easy trade. So, what am I missing here? Once the zones are identified (and it appears they can be pretty wide), it's a matter of finding the right options and getting filled, correct? Is that easier said than done?

I'll see if I can find an example or two for your inspection.

[brownsfan019]

Just some ideas for discussion. These could be completely off for credit spreads, so go easy on me.

SPY




The overhead resistance is kinda close though, so maybe that would void this trade? Or would you consider just making the upper even wider? This is a SPY weekly chart, so not sure if that's good, bad or indifferent.

IWM





I guess the real question is where is the 'sweet spot' on putting a credit spread on? What I mean is, as I flipped through some ETF's, I saw a good lower or upper area, but would be concerned that the other side of the trade was too close. In other words, with the SPY chart here, the upper side of this trade seems close to me. I think the lower end is 'safer', but the upper end would have me concerned.

How do you view this and handle this?

[TinGull]

Well, the IWM chart you show marks out the exact trade I'm currently working. My short legs are at 72 and 86.

The SPY chart you show marks out almost exactly the trade I'm currently in. My short legs there are at 143 and 158. So, pretty much you're right on. With the current market conditions I'd say they're pretty much right on for doing these iron condors. We're seeing very whippy, volatile action without any real direction. ICs are directionless plays.

So...it is really that easy. You could certainly "leg into" an IC if you wanted, by selling a call vertical when price is at the top of an area you think it will respect, and then wait for it to venture down to the bottom to enter a put vertical and complete the IC. I tend to enter them all at once when market conditions warrant. If the market is trending like it was last year and half of this year, I'd be looking just at selling put verticals since the odds were with the market to go up.

Anyhow...you're seeing things right. The R/R really SUCKS on IC's, but the probabilities really play in your favor and as long as you know how to manage a trade and have a plan of attack when price gets to a S/R level you're watching...then you'll do fine.

[TinGull]

New IC on IWM for DEC expiry. Volatility chains saying an 80% chance of success on this one.