SPY Analysis


I have entered a short bear vertical spread on SPY, using options that trade for the last time 50 days hence, on Dec. 21. The premium is a $4.22 credit and the stock at the time of entry was priced at $273.a8.

I made the decision to enter the trade in my account based on Elliott wave analysis. My count shows that the requirements have been met for a wave 2 upward correction at the Minute degree, and I anticipate the next move will be a wave 3 decline.

The profit zone for this position is $270.78 and below.

Implied volatility stands at 20%, which is about the same as the VIX, a measure of the volatility of the S&P 500 index.

SPY’s IV stands higher than 20% of its daily readings over the past year.

The price used for analysis was $272.93.

Premium: $4.22 Expire OTM
SPY-bear call spread Strike Odds Delta
Long 285.00 78.6% 23
Break-even 270.78 66.9% 35
Short 275.00 55.2% 47

The premium is 84% of the width of the position’s wing.

The risk/reward ratio is 1.4:1, with a maximum potential loss of $583 per contract and a maximum potential reward of $422 per contract.

The bid/ask spread was 1%.

By Tim Bovee, Portland, Oregon, Nov. 1, 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.

Creative Commons License

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.