SPY Analysis


Update 6/11/2018: SPY as it turned out extended its 2nd-wave correction to the upside after I entered the position on May 14, entering a persistent rise on May 19 that continues to this day.

I exited for a loss more than a month before the options would have expired, for a $6.94 debit with shares at $278.51. I shall re-establish a position once the correction has ended.

Shares rose by 6.1% over my 39-day holding period, or a +57% annual rate. The options position lost 57.9% for a -542% annual rate and -1.5% share-equivalent loss.

I have entered a short vertical spread on SPY, using options that trade for the last time 66 days hence, on July 20. The premium is a $3.26 credit and the stock at the time of entry was priced at $270.86.

I made the decision to enter the trade in my account based on a reversal from the peak of May 14, beginning by my Elliott wave count the 3rd wave to the downside at the Minute degree.

Implied volatility stands at 15%, which is equivalent to the VIX, a measure of the volatility of the S&P 500 index.

SPY’s IV stands higher than 18% of its daily readings over the past year and stands in the 11th percentile of its most recent broad movement..

The price used for analysis was $270.85.

Premium: $3.26 Expire OTM  
SPY-bear call spread Strike Odds Delta
Long 280.00 79.3% 22
Break-even 268.74 66.9% 35
Short 272.00 54.5% 48

The premium is 81.5% of the width of the position’s wings.

The risk/reward ratio is 1.5:1, with maximum risk per contract of $473 and reward of $308.

The bid/ask spread was 0.9%.

By Tim Bovee, Portland, Oregon, May 15, 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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