New Trade Entry : SPX Weekly Credit Spread for June 4 cycle. Below is the position entered earlier today:
SPX Position Entered Friday, June 21, 6 days prior to expiration.
This is the Quarterly cycle for SPX, and the last day to trade the position is Thursday, June 27.
The 20 day Moving Average was at 1631.66 at the time of entry, with SPX at 1591.06. Because the price of SPX was below the Moving Average, a Call Credit Spread was entered.
SPX June 4 Credit Spread shortly after entry
Time of entry: 1:25 pm Eastern. SPX price: 1,591.06 at entry; VIX at 18.97
SOLD June 4 1630 Call. Delta -.15 at time of entry
BOUGHT June 4 1640 Call
Credit received: $1.30
Maximum margin/risk is $870. Maximum risk is the width of the spread ($1,000) less credit received $130.
Target Gain: $97.50 (75% of credit received). This gain represents a 11.2% gain on actual margin.
Maximum Loss: $130
I recommend that a "good to cancel" order be entered to close the position for either target gain or max loss. This can be done using an OCO (one-cancels-other) order on most broker's platforms. Each broker is a bit different; I suggest that you contact your broker for the proper setup of the OCO. Having this in place removes the emotions that can sometimes cloud a trader's judgement, and reduces the amount of time needed to be at your computer monitoring the position.
For those unfamiliar with this trade, the guidelines were published on May 12, 2013. The article can be found here: Link to Articles
The original guidelines call for a Tuesday entry, however, with the volatility at this level, there is usually sufficient credit to enter any day up until Friday.
I decided not to enter a RUT Credit Spread for this cycle; the market still appears a bit "jittery" to me so I will sit this week out on RUT and enter both SPX and RUT next week if the market conditions are calm and within the guidelines.
I will post an update as the trade progresses.
As always, stay keen on your risk management and trade carefully.