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 roll out now, for a $4.71 debit with shares at $265.83,  and shall re-enter a bear position at an appropriate moment with a later expiration. 

Shares rose by 2.6% over 27 days, or a +36% annual rate. The options position produced a -12.3% loss for a -166% annual rate.

I have entered a short vertical bear spread on SPY, using options that trade for the last time 45 days hence, on May 18. The premium is a $4.13 credit and the stock at the time of entry was priced at $259.00.

I made the decision to enter the trade based on the Elliott wave count. I see SPY as being in a 3rd wave down within a 3rd wave down at the Minuette level, which is what I normally trade, within a 1st wave down at still higher levels.

The present wave down, which began on March 13, has yet to move below the Minuette 1st wave endpoint of $252.92 on Feb. 9. A decline below that level, which I’m betting on with this trade, will confirm that the 3rd wave is underway. A move back to the upside would suggest that the 2nd wave in the upward correction is not yet complete and doing something other than a simple zig-zag. Since 2nd waves almost always tend to be simple zig-zag patterns, I would be surprised to see something more complex happen. 

Time will tell, of course, and if I am proven incorrect in my judgement, my analysis will tell me when to get out in order to mitigate my losses.

Implied volatility stands at 22%, which is to VIX, a measure of the volatility of the S&P 500 index.

SPY’s IV stands higher than 41% of its daily readings over the past year and stands in the 70th percentile of its most recent broad movement..

The price used for analysis was $258.58.

Premium: $4.13 Expire OTM  
SPY-bear call spread Strike Odds Delta
Long 271.00 79.7% 22
Break-even 256.87 68.0% 34
Short 261.00 56.2% 46

The risk/reward ratio is 1.4:1.

The bid/ask spread was 0.5%.

By Tim Bovee, Portland, Oregon, April 3, 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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18 thoughts on “SPY Analysis

  1. […] The S&P 500 and its largest exchange traded fund SPY has paused this morning, with the advance/decline ratio declining below its level of the last two trading days and implied volatility ticking up a bit. I continue to be in wait-and-see mode and anticipate no trades today. The entry analysis of my SPY positions can be found here and here, […]


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