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 |
Calls | |||
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
Disclaimer
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.
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
[…] have added a new position on SPY to my account, a bear play. The analysis includes a discussion of my decision to take the trade […]
LikeLike
[…] benefiting my bear positions on exchange-traded fund that tracks the index, SPY (analyses here and here). The percentage of maximum profit on each position stands below 25%; my goal is to exit at 50% or […]
LikeLike
[…] S&P 500, which underlies my positions in the exchanged-traded fund SPY (analyses here and here). In Elliott wave terms, the index continues to work through what appears to be a 2nd wave […]
LikeLike
[…] The entry analysis for my positions on SPY are here and here. […]
LikeLike
[…] In the first hour of trading SPY has remained within the sideways range that began in late March. I shall continue to hold my positions (entry analyses here and here). […]
LikeLike
[…] hav two positions in SPY, whose entry analyses are here and here. I have been concentrating my efforts on broad indexes since the bear market began on Jan. 26 and […]
LikeLike
[…] SPY continues the sideways course established from the March 23 low. I shall continue to hold my options positions, which expire in mid-May. Entry analysis of my positions may be found here and here. […]
LikeLike
[…] opening no new positions and taking no action on my SPY positions, whose analyses are here and here. The positions expire May 18, so there is time, in Elliott wav terms, for Submicro waves 3, 4 and 5 […]
LikeLike
[…] positions, whose analyses are here and here, expire in 29 days, and practically speaking I would want to roll out in 22 days. The present rise, […]
LikeLike
[…] 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, […]
LikeLike
[…] All of which indicate a waning enthusiasm for the blue chips, which is a good sign for my bear positions in SPY, the fund that tracks the index. The entry analyses are here and here, […]
LikeLike
[…] the decline that began on April 18. My bear positions, whose entry analyses are here and here, are benefitting from the […]
LikeLike
[…] of SPY, which remains within Friday’s range. (Entry analyses of my positions are here and here.) And my exit signal remains unchanged; I shall close the positions when the Fisher Transform moves […]
LikeLike
[…] SPY’s course remains consistent with the chart analysis posted Friday in my April 20 live feed; the Fisher Transform continues to show downtrending. I anticipate no trades today unless either of those metrics changes. (Analysis upon entry of my two bear positions on SPY are here and here.) […]
LikeLike
[…] SPY continues its decline, continuing the trend that began after the April 18 peak. My chart analysis of Tuesday remains valid. The Fisher Transform this morning still signals a downtrend. So at this point I see no need for action on my two bear positions on SPY, which I analyzed here and here. […]
LikeLike
[…] My SPY positions were analyzed at entry here and here. […]
LikeLike
[…] SPY continues its decline as described in Thursday’s chart talk. I see no need for action on my positions, here and here. […]
LikeLike
[…] The Fisher Transform on the SPY daily chart moved to uptrending, and that is my signal to exit my SPY positions, here and here. […]
LikeLike