Lot 2022-3
Update 2/24/2022: I exited my bear call vertical options spread on SPY, 49 days before expiration, for a $2.06 debit per contract/share, a profit before fees of $214.00 per contract. Shares were trading at $412.53, down $17.21 from the entry level.
The Implied Volatility Rank at exit was 82.7%, up 18.9 points from the entry level.
I exited because the position reached 51% of maximum potential profit, one point above my normal 50% exit point for options positions.
Shares declined by 4.0% over two days for a -731% annual rate. The options position produced a 103.9% return for a +18,959% annual rate.
I have entered a short bear call options spread on SPY, using options that trade for the last time 51 days hence, on April 14. The premium is a $4.20 credit per contract share and the stock at the time of entry was priced at $429.74.
The Implied Volatility Ratio stood at 63.8%.
| Premium: | $4.20 | Expire OTM | |
| SPY-bear call spread | Strike | Odds | Delta |
| Calls | |||
| Long | 450.00 | 76.0% | 27 |
| Break-even | 444.20 | 70.0% | 33.5 |
| Short | 440.00 | 64.0% | 40 |
The premium is 84% of the width of the position’s short/long spread. The profit zone covers a 3.4% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 1.4:1, with maximum risk of $580 and maximum reward of $420 per contract.
How I chose the trade. The trade was placed to coincide with Elliott wave analysis of the S&P 500, which brings an expectation that the downtrend that began on January 4 has resumed.
By Tim Bovee, Portland, Oregon, February 22, 2022
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
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
Tim Bovee, Private Trader 
[…] showing that the downtrend that began January 4 has resumed after an upward correction. I’ve posted an analysis of the […]
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[…] exited my short bear call vertical spread on SPY for 51% of maximum potential profit and have updated the trade analysis with full […]
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