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August 2021 Trades

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E Trader
Posts: 28
Topic starter
(@e-trader)
Eminent Member
Joined: 9 months ago

Hey, all.  I didn't see an August post yet.  I made a cash purchase on a house, so I'm on hold with the SPX put strategy until I can do a cash out re-fi.

New record highs with a VIX around 15 or 16.  

Regarding strike choice, how many pts away and what kind of credits are you guys comfortable with in this environment?

22 Replies
earlyretirementnow.com
Posts: 231
(@earlyretirementnowcom)
Member
Joined: 6 years ago

Good thinking!

My trades today: strikes between 4300 and 4375 for Wed expiration. Sold the lower strikes puts early in the morning when the market was still underwater.

Premiums are meager: 0.87 on average. Waiting for the next deep drop!

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nobatmanjokes
Posts: 86
(@nobatmanjokes)
Trusted Member
Joined: 1 year ago

4350-4000 depending on time of day for me. Premiums averaged 1.4.

If I were trading 1 XSP while working I’d be up at 15 delta or more. If I were trading 10 SPX and in retirement I’d be closer to ERN’s premiums.

In addition to the often discussed volatility and market factors, I also consider my leverage target and the portfolio of assets I hold for margin. Together these four factors drive most of my decision of where to set strikes.

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NavyPack
Posts: 159
(@navypack)
Estimable Member
Joined: 1 year ago

Monday - I sold the Wednesday Puts at 4390 and 4400 near the close for 1.20 and 1.30.

Tuesday - I sold the Friday(AM) Put at 4300 near close for 1.65.

Need to risk off a bit to wait for a bigger drop to get the VIX up and relieve some pressure.

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E Trader
Posts: 28
Topic starter
(@e-trader)
Eminent Member
Joined: 9 months ago

I'm back! and trading the /ES puts until my account gets re-funded and my portfolio margin status is reactivated.

I got the /ES 4255, 4265, and 4300 strikes for Fri. w/ an avg credit of 1.08.  Sold them mid day Wed.  Took a bit of heat towards the end of the day and this morning.  Back to break even at Thurs. close

<I also discovered the risk limits at TD Ameritrade.  Despite having the margin, this trade fails the black swan liquidity test and I'm limited to closing transactions only>

Help (cash) is on the way.

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5 Replies
figuy1
(@figuy1)
Joined: 9 months ago

Eminent Member
Posts: 40

@e-trader Wow that's scary, how much margin are you carrying for each put?  It seems that Interactive Brokers has a lot lower risk limits as long as your on Portfolio Margin.

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E Trader
(@e-trader)
Joined: 9 months ago

Eminent Member
Posts: 28

@figuy1 TD requires 12650 margin per /ES put.  They are half the size of SPX puts so you have to sell 2 for every 1 SPX put you would sell.

Even though you have the margin, you may not pass their 'Tail Risk Liquidity Test'. They run this test on portfolio margin accounts as well as Reg-T accounts trading futures and futures options.  Here are those parameters:

"Each day a broad market stress test is conducted on margin accounts within TD Ameritrade based on the beta weight of the entire portfolio to the benchmark S&P 500 Index (SPX). This is a tail risk liquidity test to prevent over leveraging of accounts in a “Black Swan” event. The maximum theoretical loss based on a +/-20% move, +10% move or a -12% move in SPX is then compared to the accounts liquidation value. Index Future Positions may provide an offset to the theoretical P&L in the Securities portfolio. Accounts will be restricted to liquidating transactions only, if the resulting loss in the portfolio exceeds either:

  1. Two times the Net Liquidation Value at DOWN 20% level,
  2. Three times the Net Liquidation Value at the UP 20% level,
  3. One time the Net Liquidation Value at DOWN 12% level, or
  4. One time the Net Liquidation Value at UP 10% level

**Note: A theoretical loss that exceeds three times the Net Liquidation Value at DOWN 20% level would result in the client having to take action the day of the breach bring the DOWN 20% theoretical loss under two times the Net Liquidation Value. A theoretical loss that exceeds four times the Net Liquidation Value at UP 20% would result in the client having to take action the day of the breach to bring the theoretical loss under back under three times the Net Liquidation Value.**   "

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figuy1
(@figuy1)
Joined: 9 months ago

Eminent Member
Posts: 40

@e-trader So how much does that equate to in how much they make you hold per es contract?  If SPX is down 20%, you'd lose about $40k/contract, is this about how much they make you hold or is it double that?

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E Trader
(@e-trader)
Joined: 9 months ago

Eminent Member
Posts: 28

@figuy1 You only need the margin to hold the trade.  1 ES put requires $12,650 in margin.  But, just because you have the margin to enter a position doesn't mean it will pass their tail risk liquidity test. 

So, realisticly, you'd need 25-30k per /ES put (this would allow for a statistically probably price decline and keep the 12% down loss level from exceeding 1x of your net liq--in the event of a black swan, you'd need more to prevent them from locking your account to closing orders only)

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NavyPack
(@navypack)
Joined: 1 year ago

Estimable Member
Posts: 159

@e-trader my SPX puts at TDAmeritrade require 55-57k margin , so that tracks with your 25-30k comment above on /ESp puts.

 

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