SPY Analysis


Update 4/30/2018: I exited SPY as it continued an uptrending counter-trend correction. The decision was based on Elliott wave analysis and the timing on the Fisher Transform metric.

By my count SPY continued to trace out a 4th wave to the upside at the Minuette degree. It has completed requirements for an A-wave to the upside at the Sub-minuette degree, but without guarantees that the A-wave is indeed complete.

With 18 days left until expiration of the position, I chose to exit for a $5.70 debit with shares at $265.75 and shall re-enter a bear position at an appropriate moment with a later expiration.

Shares rose by 1.9% over 33 days, or a +22% annual rate. The options position produced a -24.0% loss for a -265% annual rate.

I have entered a short vertical spread on SPY, using options that trade for the last time 51 days hence, on May 18. The premium is a $4.33 credit and the stock at the time of entry was priced at $260.57.

I made the decision to enter the trade in my account based on Elliott wave analysis. At the level I trade, the Minuette, I count SPY as tracing a 3rd wave down within a higher 1st wave down, and one level down within the Minuette, a 3rd wave down.

Implied volatility stands at 23%, which is nearly identical to the VIX, a measure of the volatility of the S&P 500 index.

SPY’s IV stands higher than 45% of its daily readings over the past year and stands in the 83rd percentile of its most recent broad movement..

The price used for analysis was $260.65.

Premium: $4.33 Expire OTM  
SPY-bear call spread Strike Odds Delta
Long 273.00 79.0% 23
Break-even 258.67 68.0% 35
Short 263.00 56.9% 46

The premium is 86.6% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

The bid/ask spread was 0.7%.

By Tim Bovee, Portland, Oregon, March 28, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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