Lot 2022-5
Update 12/28/2022: I exited my short bear call vertical spread on SPY, 23 days before expiration, for a $1.30 debit per contract/share, a profit before fees of $130 per contract. Shares were trading at $378.22, down $5.26 from the entry level.
The Implied Volatility Rank at exit was 21.1%, down 4.3 points from the entry level.
I exited because the position reached 50% of maximum potential profit, my normal exit point for options trades.
Shares fell by 1.4% over nine days for a 56% annual rate. The options position produced a 100% return for a 4,056% annual rate.
I have entered a short bear call vertical spread on SPY, using options that trade for the last time 32 days hence, on January 20, 2023. The premium is a $2.60 credit per contract share and the stock at the time of entry was priced at $383.48.
The Implied Volatility Ratio stood at 25.4%.
| Premium: | $2.60 | Expire OTM | |
| SPY-bear call spread | Strike | Odds | Delta |
| Calls | |||
| Long | 406.00 | 86.0% | 16 |
| Break-even | 398.60 | 78.5% | 23.5 |
| Short | 396.00 | 71.0% | 31 |
The premium is 52% of the width of the position’s short/long spread. The profit zone covers a 3.9% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 2.8:1, with maximum risk of $740 and maximum reward of $260 per contract.
How I chose the trade. I placed the trade based on Elliott wave analysis showing that S&P 500 — the index upon which SPY is based — began a downtrend on December 13.
By Tim Bovee, Portland, Oregon, December 19, 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 
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