S&P 500 ETF Trust (SPY)

Lot 2023-5

Update 10/12/2023: I exited my short bull put vertical spread on October 12, a few hours after entry, eight days before expiration, for a $57 debit per contract/share, a profit before fees of $112 per contract. Shares were trading at $431.32, down $4.98 from the entry level.

The Implied Volatility Rank at exit was 29.2%, up 10.8 points from the entry level.

I exited on the day of entry because the position reached 50% of maximum potential profit, my normal exit point spreads.

Shares fell by 1.1% over 2 hours and 15 minutes for a -1,111% annual rate. The options position produced a 98.2% return for a +95,626% annual rate.

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I have entered a bear call vertical spread on SPY, using options that trade for the last time eight days hence, on October 20, 2023. The premium is a $1.13 credit per contract share and the stock at the time of entry was priced at $436.30.

The Implied Volatility Ratio stood at 18.4%.

Premium:	$1.13	Expire OTM
SPY-bear call spread	Strike	Odds	Delta
Calls
Long	446.00	89.0%	11
Break-even	442.13	80.0%	19.5
Short	441.00	71.0%	28

The premium is 5% of the width of each of the short/long spreads. The profit zone covers a 1.3% move to the upside and a unlimited move to the downside.

The risk/reward ratio is 3.4 :1, with maximum risk of $387 and maximum reward of $113 per contract.

How I chose the trade. I selected the short strike prices based on the expected range of the expiration close, based on the options pricing. In entering the position, I expect SPY to decline, based on my Elliott Wave analysis of the S&P 500 futures, which shows a downtrending 5th wave having begun on the day of the trade.

By Tim Bovee, Portland, Oregon, October 12, 2023

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

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Based on a work at www.timbovee.com.