SPY Analysis

SPDR S&P 500 ETF Trust (SPY)

Lot 2020-15

Update 6/15/2020: I exited my short bear call spread on SPY for 54.5% of maximum potential profit. The debit at exit was $0.30, compared to an entry credit of $0.66, with shares trading at $297.50, down from $309.38 at entry.

SPY declined steadily after I entered the position on June 11, with the implied volatility rank rising to 47%, which is 13.7 points above its entry level.

I made the entry and exit decisions based on Elliott wave analysis. SPY was in the middle of Minor wave 3 within Intermediate wave 1 of Primary wave 3 at the time of entry. At exit it was in Minor wave 5 and possibly nearing an end.

Shares declined by 3.8% over four days for a -13% annual rate. The options position produced a return of 23.3% for a +10,950% annual rate.

I have entered a short bear call spread on SPY, using options that trade for the last time 36 days hence, on July 17. The premium is a $0.66 credit per contract share and the stock at the time of entry was priced at $309.38.

The implied volatility rank (IVR) stands at 33.3%.

Premium: $0.66 Expire OTM
SPY-bear call spread Strike Odds Delta
Long 333.00 86.0% 18
Break-even 328.34 84.0% 20
Short 329.00 82.0% 22

The premium is 33% of the width of the position’s wing.

The profit zone covers a 6.1% move to the upside.

The risk/reward ratio is 5.1:1, with maximum risk of $334 and maximum reward of $66 per contract.

By Tim Bovee, Portland, Oregon, June 11, 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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