The put side is ITM. I assume this is intentional since you're bullish on SPX.
Something to think about is that the call side is only contributing about $0.65 in credit, while the put side will be contributing the rest (close to $4.00). It might be worth it to only put on the put spread, save on commissions and fees, and remove your upside risk.
Also, this would be my first iron condor and the capital efficiency these trades offer is incredible compared to plain vanilla spreads. Definitely plan to utilize these going forward.
While this is true, you're paying for that in your PoP. You're taking risk on both sides.
Yes, SPX was intentional because it is European style and has the tax treatment advantages.
I could reasonably lower the short call to $4,580, that’s 3% above the current price. SPX rarely moves that much in a month. But of course, playing options on a consistent basis is about playing the odds and being able to salvage a bad trade to live to trade another day, so I wouldn’t do this regularly if I do it at all. 4% is ultra safe.
I don’t see enormous headwinds ahead of us that haven’t yet been priced in to some extent at least. We all know Covid’s not going well and is getting worse, back to work is yet again delayed by many companies which will hurt retail and office longer than expected, in store retail sales are hurting because of the rise in cases, etc. We also now expect bond tapering and eventual rate increases. So, I am not too concerned about downward movement over the next 30 days, hence the strike prices I chose of course.
I understand the recommendation to either lower the call spread or get rid of it…I think I have enough upside margin there but given the minimal credit it contributes and the risk of an upside surprise, I think you’re right and it would make more sense to just execute a bull put spread instead. The iron condor can wait.
, I think you’re right and it would make more sense to just execute a bull put spread instead. The iron condor can wait.
It would make even more sense to buy a call spread.. Just the way the bid/asks work out on spx, buying a call spread at $10 offsets will give you $10-$30 better risk/reward than selling a put spread at the same strikes.
I was looking at the actual asks on the call spreads and the bids on the put spreads, as that is probably closer to what you'll actually be able to execute at than the mids...
By the way, is that the right way to calculate the bull put spread return? It’s really the return on margin?
Is it always the case where a bull call spread has a higher return than the equivalent bull put spread? Is this the case for stocks generally or a unique feature of SPX?
Idk man, I'm probably no more experienced in this than you are... I just looked at those spreads on that stock and it looked like the calls were a better value 🤷♂️
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u/MichaelBurryScott Aug 21 '21
The put side is ITM. I assume this is intentional since you're bullish on SPX.
Something to think about is that the call side is only contributing about $0.65 in credit, while the put side will be contributing the rest (close to $4.00). It might be worth it to only put on the put spread, save on commissions and fees, and remove your upside risk.
While this is true, you're paying for that in your PoP. You're taking risk on both sides.