SPY Analysis (lot 5)

SPDR S&P 500 ETF Trust (SPY)

Note: This post was originally, and incorrectly, labeled as lot 6. “Lot 5” is correct.

Update 3/12/2020I have exited my short bear call options spread, three days after entry, for a $0.49 debit per contract share, a $0.94 profit, as shares were trading for $252.11 per share, down $23.50 from the entry level. The exit came at 64.7% of maximum potential profit.

After I entered the position, SPY did a mini-bump to the upside before continuing its downward movement. The implied volatility rank at the close was 113.8%, 23.9 percentage points higher than at entry.

Shares declined by 8.5% over three days, for a -1,037% annual rate. The options position produced a 189.2% return for an annual rate of +23,2340%.

I have entered a short bear call spread on SPY, using options that trade for the last time 39 days hence, on April 17. The premium is a $1.43 credit and the stock at the time of entry was priced at $276.41

The position is profitable below $300.57.

The implied volatility rank (IVR) stands at 89.8%.

The entry came after a 7-1/2% price drop at the opening. From my Elliott wave analysis, I expect that the present Minor 3rd wave will continue down within an Intermediate 3rd wave.

Premium: $1.43 Expire OTM
SPY-bear call spread Strike Odds Delta
Long 307.00 90.0% 13
Break-even 300.57 87.5% 17
Short 302.00 85.0% 20

The premium is 57.2% of the width of the position’s wing.

The profit zone covers an 8.7% move to the upside and an unlimited move to the downside of the entry price.

The risk/reward ratio is 2.5:1, with maximum risk of $357 and maximum reward of $143 per contract.

By Tim Bovee, Portland, Oregon, March 9, 2020


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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