Credit Spreading

Today I will start the bread and butter portion of my trading, the credit spread. I will be focusing on the $SPX this morning, and moving on to other instruments later in the week. I feel there are dozens of ways to set a credit spread, some people might sell a certain Delta or sell to receive a specific credit. I will normally sell almost anything 10% below the market and 6% above the market. Another way to do this is to sell below support or above resistance or sell 2 standard deviations below and 1 standard deviation above. The ways to do this are countless, but I stick to the percentage rule because I like consistency, but selling 2 standard deviations below the market is about 10% on the $SPX.

Spread Update Time

On January 7^th I set an iron butterfly and received a credit of $32.00, I sold the 1135 and had 45 point wings. Currently this trade is trading at $29.35 that’s a $2.65 profit. Below is the risk profile of my trade.

SPX

The last couple of days the SPX has been in my opinion turning. Every time we made a turn in the market the market started to produce small body candles and long wicks. Sideways action is also a key component to this pattern, so it might take a few days for this pattern to play out.

The dollar is a big discussions out there right now, and I think that it is more important then ever. Its important to my trading whether I'm trading wheat or corn futures or trying to predict market direction. Right now I think that the dollar has more down side, with little or no support till 75.10.

I also think that gold has had too big of a move to the upside and should be either shorted via GLD or a long put spread should be set. The candle that formed yesterday on the GLD is very bearish. If you are long GLD you need to have your eyes peeled and keep a tight trail stop on your position.

To recap my thoughts; I'm bullish equity and bearish on the dollar.