New Trade Entry : SPX Weekly Credit Spread for August 1 cycle Below is the credit spread position entered this morning:
SPX Credit Spread Position Entered Thursday, July 25, 8 days prior to expiration. The Option Code for this cycle is SPXW130802, expiring August 2.
The 20 day Moving Average was at 1658.61 at the time of entry, with SPX at 1681.12. Because the price of SPX was above the Moving Average, a Put Credit Spread was entered.
SPX August 1 Credit Spread shortly after entry
Time of entry: 11:25 am Eastern. SPX price: 1,681.12 at entry; VIX at 13.44
SOLD August 1 1640 Put. Delta -.14 at time of entry
BOUGHT August 1 1630 Put
Credit received: $.90
Maximum margin/risk is $910. Maximum risk is the width of the spread ($1,000 less credit received $90.
Target Gain: $67.50 (75% of credit received). This gain represents a 7.4% gain on actual margin.
Maximum Loss: $90
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, but I have found that sufficient credit is often available for an entry as late as Friday.
I have not yet entered a RUT credit spread or SPX Iron Condor; I prefer to diversify trade entry a bit by time and will re-visit entry later today or tomorrow if conditions are within the guidelines.
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully.