New Trade Entry : SPX Weekly Credit Spread for the December cycle Below is the credit spread position entered this morning:
SPX Credit Spread Position Entered Thursday, December 12, 7 days before expiration. The Option Code for this cycle is SPXW131221, expiring December 21.
The 20 day Moving Average was at 1796.07 at the time of entry, with SPX at 1780.69. Because the price of SPX was below the Moving Average, a Call Credit Spread was entered.
SPX December Credit Spread shortly after entry
Time of entry: 11:00 am Eastern. SPX price: 1,780.69 at entry; VIX at 15.36
SOLD December 1820 Call. Delta .12 at time of entry
BOUGHT December 1830 Call.
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 only variation from the original guidelines is the day of entry; this can vary depending on volatility and market conditions.
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully.