SPY Analysis


Update 6/11/2018: Exited. Results to be posted shortly.

I have entered a short vertical spread on SPY, using options that trade for the last time 43 days hence, on June 15. The premium is a 2.92 credit and the stock at the time of entry was priced at $262.50.

I made the decision to enter the trade in my account after concluding, based on Elliott wave analysis, that a 3rd wave down at the Minuette degree has begun. The Minuette is my preferred degree for trading options.

Implied volatility stands at 16%, identical to the VIX, a measure of the volatility of the S&P 500 index.

SPY’s IV stands higher than 23% of its daily readings over the past year and stands in the 37th percentile of its most recent broad movement, lower than I like for an individual stock but acceptable for broad fund like SPY.

The price used for analysis was $261.16.

Premium: $2.92 Expire OTM  
SPY-bear call spread Strike Odds Delta
Long 271.00 78.5% 23
Break-even 261.08 67.6% 34
Short 264.00 56.7% 45

The premium is 83% of the width of the position’s wings.

The risk/reward ratio is 1.4:1, with maximum risk per contract of $473 and reward of $308.

The bid/ask spread was 0.7%.

By Tim Bovee, Portland, Oregon, May 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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