Update 3/18/2020: I’ve exited my short bear call spread options position, lot 7, on SPY for a $0.71 debit per contract/share, a profit of $0.71, with shares trading at $240.35, down $11.30 from their entry level. The position earned 50% of maximum potential profit.
The day after I entered the position, SPY peaked, and then began a rapid decline. The implied volatility rank was 83.6% at exit, down 26.5 percentage points.
Shares fell by 4.5% over six days, or a -19% annual rate. The options position produced a 100% return for a +6,083% annual rate.
I have entered a short bear call spread on SPY, using options that trade for the last time 36 days hence, on April 17. The premium is a $1.42 credit and the stock at the time of entry was priced at $251.69.
The position is profitable below $285.58.
The implied volatility rank (IVR) stands at 110.1%.
In terms of Elliott wave analysis, the position was opened during Minor wave 3 to the downside.
| Premium: | $1.42 | Expire OTM | |
| SPY-bear call spread | Strike | Odds | Delta |
| Calls | |||
| Long | 293.00 | 90.0% | 12 |
| Break-even | 285.58 | 87.5% | 16 |
| Short | 287.00 | 85.0% | 20 |
The premium is 47.3% of the width of the position’s wing.
The profit zone covers a 13.5% move to the upside and an unlimited move to the downside of the entry price.
The risk/reward ratio is 3.2:1, with maximum risk of $458 and maximum reward of $142 per contract.
By Tim Bovee, Portland, Oregon, March 12, 2020
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.
License
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Based on a work at www.timbovee.com.
Tim Bovee, Private Trader 
[…] I’ve posted two analyses of short bear call spread options positions I entered this morning, SPY lot 6 and SPY lot 7. […]
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[…] SPY (lot 7) has hit half of the position’s maximum potential profit, triggering an exit. I shall update the entry analysis with results shortly. […]
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