S&P 500 ETF Trust (SPY)

Lot 2023-9

Update 10/30/2023: I exited my short bull put vertical spread on SPY, four days before expiration, for a $1.39 debit per contract/share, a loss before fees of $32 per contract. Shares were trading at $413.61, down $3.80 from the entry level.

The Implied Volatility Rank at exit was 61.1%, up 8.7 points from the entry level.

I exited because the position had reached my management point. The options had nine days to go until expiration when I entered, and my management point is about half that. In this case, at four days before expiration. The position lost because it bet on an upward move and the price moved down instead, the result of ambiguity creating by the chart’s bottom fishing, something much disussed in my daily S&P 500 futures analyses of late.

Shares fell by 0.9% over five days for a -67% annual rate. The options position produced a -23.0% loss for a -1,681% annual rate.

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I have entered a bull put vertical spread on SPY, using options that trade for the last time nine days hence, on November 3. The premium is a $1.07 credit per contract share and the stock at the time of entry was priced at $417.41.

The Implied Volatility Ratio stood at 52.4%.

Premium:	$1.07	Expire OTM
SPY-bull put spread	Strike	Odds	Delta
Puts
Long	406.00	80.0%	19
Break-even	412.07	74.5%	24.5
Short	411.00	69.0%	30

The premium is 42.8% of the width of the short/long spread. The profit zone covers a 5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 3.7:1, with maximum risk of $393 and maximum reward of $107 per contract.

How I chose the trade. I selected the short strike prices based on an Elliott Wave analysis that sees SPY as nearing the end of the B wave within a 4th wave upward correction and nearing the start of an upward C wave.

By Tim Bovee, Portland, Oregon, October 25, 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.