New Trade Entry : SPX Weekly Credit Spread for the January weekly cycle Below is the credit spread position entered this morning:
SPX Credit Spread Position Entered Friday, January 10, 6 days before expiration. The Option Code for this cycle is SPX140118, This is the regular monthly cycle that expires on January 18.
The 20 day Moving Average was at 1832.18 at the time of entry, with SPX at 1836.48. Because the price of SPX was above the Moving Average, a Put Credit Spread was entered.
SPX January Credit Spread shortly after entry
Time of entry: 10:50 am Eastern. SPX price: 1,836.48 at entry; VIX at 12.75
SOLD January 1805 Put. Delta .13 at time of entry
BOUGHT December 1795 Put.
Credit received: $.75
Maximum margin/risk is $250. Maximum risk is the width of the spread ($1,000 less credit received $75).
Target Gain: $56.25 (75% of credit received). This gain represents a 6.1% gain on actual margin.
Maximum Loss: $75
Right after my order filled, SPX moved up a bit. The next higher strike, the 1810 put, has a delta of-.17. This is just a bit higher than I normally like to sell, but is certainly within reason as long as the minimum credit of .75 is available. I do not recommend selling a higher strike than the 1810.
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.
Next week is the planned entry for the February IWM Iron Condor; Monday is 39 days to expiration so I will begin to look at setups for this position.
As always, stay keen on your risk management and trade carefully.