Is Hedging 4:15PM expiration Spreads with Intraday Spreads a viable strategy?

#1

I’ll give a specific hypothetical example:

If I were to BUY a 2050-2090 Daily Spread, and hedged it by SELLING a 2050-2060 Intraday Spread (assuming of course this spread is available), is this something that could work? I’m thinking with identical floors, the risk to the downside is reduced as the SOLD spread will gain value as the BOUGHT spread loses value (and vice-versa). And as far as upside potential, I can only lose up to 2060 on the SOLD spread, but can make up to 2090 on the BOUGHT spread. Darrell, or anyone else, I’d love your feedback on this. Thanks :slight_smile:

#2

What if you lose on your intraday and then the market reverses 30 handles right after…then you have 2 losses…this could work at 2070-2080 intraday if you were 20 handles in the black on the daily

#3

That’s a good point, but the idea would be to exit the 4:15pm when the intraday expires. If the intraday is in the red at expiration, chances are the 4:15pm will be in the black or close to even. I’m just trying to catch a two hour move, like perhaps on the US500 in the first two hours of trading. In this strategy, I’d be willing to risk a well hedged small loss for the possibility of a bigger gain on the 4:15PM

#4

Also keep in mind I can cash out on either side if on a spike or a market dump at anytime. Even way before the intraday expires.

#5

If u buy the 2050-2090 the price will be about 2058 if the indicative is 2050 @ 1700. If u sell the 2050-2060 intraday the pice will be about 2052 if the indicative is 2050 @ 0900. If @ 1100 the indicative is 2058 you are correct the daily will be about break even but the intraday will have lost 6 handles. So now ur break even is 2064.

#6

I understand what you’re saying. So long as the numbers you provide in your example are accurate.

#7

I would say to demo trade it for a bit so that you can see how it works out for you. But yes, you will have to keep in mind that you will have premium in each of those that you will have to account for as mentioned By Apexallen1