SPY Trade

SPDR S&P 500 ETF Trust (SPY)

Lot 2

Update 12/20/2021: I exited my short bear call spread position on SPY 32 days before expiration, for a $0.57 debit per contract/share, a profit before fees of $75 per contract. Shares were trading at $453.80, down $14.75 from the entry level.

The Implied Volatility Rank at exit was 53.9%, up 18.9 points from the entry level.

Under my rules, I planned to exit this position when it had reached 50% or better of maximum potential profit. The exit came at 53.8% of max.

Shares declined by 3.1% over 12 days for a -96% annual rate. The options position produced a 131.6% return for a +4,002% annual rate.


I have entered a short bear call spread on SPY, using options that trade for the last time 44 days hence, on January 21. The premium is a $1.32 credit per contract share and the stock at the time of entry was priced at $468.45

The Implied Volatility Ratio stands at 35%.

Premium:$1.32Expire OTM
SPY-bull spreadStrikeOddsDelta
Puts
Long478.0069.0%35
Break-even476.3266.0%37.5
Short475.0063.0%40

The premium is 88% of the width of the positions short/long spread. The profit zone covers a 1.7% move to the upside.

The risk/reward ratio is 1.3:1, with maximum risk of $168 and maximum reward of $132 per contract.

How I chose the trade. The exchange-traded fund underlying the trade, SPY, very closely tracks the S&P 500 futures and index, which I track in my daily posts. By that analysis, $473.54 on SPY is a peak, attained on November 22, that, according to my Elliott wave analysis, won’t be crossed by the present wave C rise that began on December 3. So based on that analysis, I allowed myself very little space on the upside, since I see nearly all of the potential as being to the downside.

By Tim Bovee, Portland, Oregon, December 8, 2021

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.

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Based on a work at www.timbovee.com.

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