Update 5/10/2022: I exited my short bull put vertical spread on SPG, 38 days before expiration, for a $1.40 debit per contract/share, a profit before fees of $47 per contract. Shares were trading at $133.31, up $13.56 from the entry level.
The Implied Volatility Rank at exit was 68.2%, down 4.9 points from the entry level.
I exited on the day after entry because the position reached 25.1% of maximum potential profit, a bit above my normal 25% exit point for earnings plays.
Shares rose by 11.3% over one day for a +4,133% annual rate. The options position produced a 33.6% return for a +12,2545% annual rate.
I have entered a short bull put vertical spread on SPG, using options that trade for the last time 39 days hence, on June 17. The premium is a $1.87 credit per contract share and the stock at the time of entry was priced at $119.75.
The Implied Volatility Ratio stood at 73.1%.
|SPG-bull put spread||Strike||Odds||Delta|
The premium is 74.8% of the width of the position’s short/long spread. The profit zone covers a 1.8% move to the downside and an unlimited move to the upside.
The risk/reward ratio is 1.7:1, with maximum risk of $313 and maximum reward of $187 per contract.
How I chose the trade. The trade was placed to coincide with SPG’s earnings announcement, after the closing bell on the day of entry. The expected move, based on options pricing, is $6.47 either way, for range of $117.23 to $123.79, and I placed the short strike within that range in order to get a better risk/reward ratio.
By Tim Bovee, Portland, Oregon, May 9, 2022
Based on a work at www.timbovee.com.