S&P 500 ETF Trust (SPY)

Lot 2023-8

Update 10/23/2023: I exited my short bull put vertical spread on October 23, seven days before expiration, for a $0.61 debit per contract/share, a profit before fees of $60 per contract. Shares were trading at $419.30, down $3.44 from the entry level.

The Implied Volatility Rank at exit was 59.8%, up 11.1 points from the entry level.

I exited on the day after entry because the position reached 49.6% of maximum potential profit, a rounding error away from my normal exit point for options positions.

Shares fell by 0.8% over three days for a -99% annual rate. The options position produced a 98,4% return for a +11,967% annual rate.

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I have entered a bear call vertical spread on SPY, using options that trade for the last time 10 days hence, on October 30. The premium is a $1.21 credit per contract share and the stock at the time of entry was priced at $422.74.

The Implied Volatility Ratio stood at 48.7%.

Premium:	$1.21	Expire OTM
SPY-bear call spread	Strike	Odds	Delta
Calls
Long	433.00	81.0%	19
Break-even	430.21	75.0%	25
Short	429.00	69.0%	31

The premium is 60.5% of the width of the short/long spread. The profit zone covers a 1.8% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.3 :1, with maximum risk of $279 and maximum reward of $121 per contract.

How I chose the trade. I selected the short strike prices based on Elliott Wave analysis of the underlying stock chart. The wave behind the trade is wave 5{-10}, which began on October 17, 2023.

By Tim Bovee, Portland, Oregon, October 20, 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.