Wednesday, February 5, 2014

Initiated MarQ$180/183 bear call spreads on SPY

Market has dropped significantly in the last couple of weeks with a large number of distribution days. So my near term outlook is bearish for the market. The SPY is around $175.20 right now. I felt it was not a good time to buy straight puts since SPY already dropped below major support level around $177.5. As VIX reached 19.60 which was close to the high of last 6 months, I decided to sell a few bear call spreads.

I played with the March Quarterly $180/182, $180/183 & $180/184 in the TOS analyzer and found the 1st two spreads had similar return on margin around 30% while the last spread had a ROM of 27%. So I sold MarchQ $180/183 bear call spreads with a credit of $0.87. The Delta of short strike $180 was around 0.3.

According to the analyzer, the ITM probability of the short strike one month later is 26% and at March 31 is about 33%. I'll treat this trade as a directional trade with some wiggle rooms. If 80% of profit is reached, I'll close the trade. If the trade lasts 30 days, I'll review it and try to close it. In case the market starts to rebound, I may close the trade when SPY reaches $181 area.


  1. What did you decide to do since the SPY is now around your adjustment mark of 181? Thanks.

    1. You're right. I was supposed to take action yesterday. Instead, I rolled the spread from March Quarterly $180/183c (Deficit of 1.85-0.87 = $0.98) to $185/188c (Credit of $0.89). It was done today since I got busy yesterday. My adjusted position have same margin, and the new profit potential is $0.09 less than the initial opening positions per contract. I will write a post later about it.
      Thanks for asking.

    2. The SPY broke above $185 level of resistance firmly today. I closed the spread with a cost of $1.82 (-$0.84 loss). Will analyze this trade later.