ATM Structure for SPX

Rick Van Buren

New Member
Entered this SPX BWB with ITM PDS today for Jan19 opex. Using deep ITM PDS instead of call spreads. I have good luck with these in getting filled and exiting when needed. I will raise the t+0 line with PCS if we move higher or with Condor rolls in a flat market (very little movement) .

With premiums being so low I have had to go further out in time (thus 86 DTE). I chose my short strike based on about where we were basing before the move starting on about 9/11 (around 2470). I am thinking this will be an area of support. I have on several other trades (expiring every 2 weeks) that give me a protective "hedge" in case of a flush down. I also have on a conditional PDS order to close the 1 - 2490/2390 PCS to flatten the delta to the back of the tent. The order will fire if we move to 2514. Also if we ramp higher I will add PCS's to raise the t+0 line to the upside. The trade uses a deep ITM PDS - others may choose Call Credit spreads - this is really a trader's choice as far as I am concerned. The trade will be managed to keep lifting the t+0 line and try to keep the delta flat to the back of the tent. I have an aversion to gamma edges! This is a pretty straight forward trade. Nothing special but they work for me since it is a part of my overall strategy to always have trades expiring. I put them on routinely.
 

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Thanks Rick for sharing. I would like to diversify my ATM trades (actually I trade overlapping short straddles on Eurostoxx50 keeping delta neutral with the underling) so I would like to have your opinion about BWB. There are a lot of different variation of similar trades like M3, Road Trip Trade, Rhino, Kevlar and maybe your setup is also similar(the majour guideline is to keep t+0 flat). So I'm a bit confused... wich is the best to start with? I would like to study a methodology about BWB but I don't know wich.
 

Rick Van Buren

New Member
Wow Andrea. I don't know where to begin regarding discussing BWB's. Really it is a matter of choice what you trade and how you enter. Many of the trades you mention (M3's RTT's etc) are variations of Butterflys. For me it has been a lot of trial and error and many man hours of backtesting. I think if you follow Trading Dominion or even join Capital Discussions you will find many "defined" rules for the entry and management of Butterfly variations. Regarding flat deltas for me - I try to keep off the gamma edge and keep my deltas fairly flat until theta decay accelerates. and pop the t+0 line.
 
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