Anyone trade Victory Spreads?

A

AT99

I always enjoy testing new option strategies and someone recently asked me to look into Victory Spreads. The advantage is it can pay off if the underlying stock goes sideways or up and has a limited downside. I have been analyzing how it works with SPY.

In this spread you sell a call a few strikes above the current price. Then you buy twice as many longer dated calls with a further out expiration date.

Here are a couple of examples (ignoring commissions):

Last week on Tuesday end of day I sold 5c of the March 20th 208 call and bought 10c of the April 2nd call. The premium was .05 debit = $25 cost. It could be closed right now for .23 credit / $115. Here is what it could be worth on Friday (short call expiration date) at various SPY prices. Just look at the Total Value column in the table. Ignore the Return on Buying Power (ROBP) as I opened it for much less.
https://www.dropbox.com/s/f5xzhhl6vih2vr2/Screenshot 2015-03-18 10.49.24.png?dl=0


I did another trade last week: Wednesday morning I sold 25c of the March 20th 207 call / bought 10c of the March 31st 210 call. I was able to get this for $0.01 credit / $25 credit. It is currently at .17 / $425. Here is what it could be worth on Friday at various SPY prices (look at the Total Value column):

https://www.dropbox.com/s/zpjvl6c9a6ds79t/Screenshot 2015-03-18 11.18.28.png?dl=0
 
I thought a ratio back spread used the same expiration date? But so many variations and what people call strategies it is definitely tough to keep track of them.
 
Just closed some of the ones sold for a .01 credit for .20 credit = .21 gain. 7% return in a week. I wanted to close some prior to the FOMC announcement.
 
I am looking for 2 things with this strategy.

1. Opportunities where I feel there is an upside bias but if wrong there is very limited downside. From what I've read, best time would be prior to earnings or another company event you feel could move the stock substantially higher.

2. I am also wondering if this can be a strategy for non-event weeks on something like SPY. Open for a credit and then sell for a small % gain weekly. It worked well this week, but need to see if that is sustainable. The short SPY calls for this week were most likely elevated due to FOMC. The March 27 / April 10 spread I am following now does not look as good as it costs more to enter and I'm not confident of a move up in SPY. But it shows how the trade has more limited downside and unlimited upside. Here is what it looks like:

https://www.dropbox.com/s/efpx09fco95eeiw/Screenshot 2015-03-18 15.47.12.png?dl=0

I was curious if anyone had any experience with these as I am just beginning to analyze them.
 
You must log in or register to reply here.
Back
Top