Are you looking for a no-touch bullish credit spread on SPX? This trade has the potential to be traded every week while this trend continues.
For those of you interested in a no-touch trade, this weekly credit spread on SPX may be just what you are looking for. I have been trading it for a few weeks live, and have had positive results thus far.
The guidelines are quite simple:
Entry Date: Monday or Tuesday, 12 or 13 days prior to expiration.
-SPX must be above the 20 day moving average to enter this position.
- Wait at least 45 minutes to 1 hour after market open before entering. Exact entry time is trader's choice.
- Look at economic news for the day. If there is potentially market moving news being announced, do not enter the trade in advance of the news release.
- If the price of SPX moves +/- a one-day, one standard deviation, do not enter the trade until the movement is less than a one-day, one standard deviation. As of today, this is approximately 11 points according to the calculation on my broker's trading platform.
Sell: Short put at a delta -15 or -16. If these deltas are not available, it is recommended to sell lower than -15 delta. More aggressive traders may choose a higher delta for more credit. However, the probability of success is greater the lower the delta.
Buy: long put 10 points lower than short strike.
Credit: Try to get as close to $1.00 credit as possible. Minimum credit: .75.
Target Gain: 75% of credit received.
A credit of $1.00 is an 8.3% gain on actual margin; .75 is a 6.1% gain, which is the minimum gain we like to see on this trade.
Max Loss: 100% credit.
Below is an example of a put credit spread for the May 4 cycle. The strikes and credit will likely not be the same at the time of entry, but will help you visualize the position details.
SPX Put Credit Spread for May 4
Details for the above sample position:
SELL SPX 1595 Put (-16 delta).
BUY SPX 1585 Put.
Maximum Risk: $910. Maximum risk is the width of the spread ($1,000), less credit received ($90).
Target Gain: $67.50 (75% of credit received.) This equates a 7.4% gain on actual margin.
Maximum Loss: $90.
Trade will be exited at target gain or max loss. If your broker will allow, you can enter an "OCO" (one cancels other) order on your broker's platform to automatically exit the trade at target gain or max loss. If you do automate the trade, however, caution is advised if the market is moving quickly against your position. In a fast moving market, it is possible that a contingent order may not trigger automatically, and you would have to manually exit the trade.
A trade update will be posted with this week's entry details.
As always, stay keen on your risk management and trade carefully.