SPY Analysis (lot 9)

SPDR S&P 500 ETF Trust (SPY)

Update 3/20/2020Three days after I entered the SPY, lot 9, short bear call spread, the S&P 500 bumped down, and I exited the position. The debit at exit was $0.48 per contract share, a $1.28 profit that is 72.7% of maximum potential profit, as shares traded for $235.11 per share, down $5.80 from the entry price.

SPY traded in a sideways trend during the position’s brief lifespan. As luck would have it, I entered high in the range and profited from fall to low in the range. At exit the implied volatility rate was 65.8%, down 12.4 percentage points from the entrance level.

Shares declined by 2.4% over four days, or a -6.3% annual rate. The options position produced a 266.7% return for a +24,333% annual rate.

I have entered a short bear call spread on SPY, using options that trade for the last time 32 days hence, on April 17. The premium is a $1.76 credit per contract/share and the stock at the time of entry was priced at $242.67.

The implied volatility rank (IVR) stands at 78.2%.

Premium: $1.76 Expire OTM
SPY-bear call spread Strike Odds Delta
Long 282.00 90.0% 12
Break-even 274.24 87.5% 16
Short 276.00 85.0% 20

The premium is 58.7% of the width of the position’s wing.

The profit zone covers a 13% move to the upside.

The risk/reward ratio is 2.4:1, with maximum risk of $424 and maximum reward of $176 per contract.

By Tim Bovee, Portland, Oregon, March 16, 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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