SPY

[oldnemesis]

http://finance.yahoo.com/echarts?s=SPY+Interactive#{"range":"10y","allowChartStacking":true}

http://stockcharts.com/h-sc/ui?s=spy

Trade:
With SPY at 188.83
Sept 125/120 bull put spread for a net credit of $26
Yield = 26/474 = 5.5% in 247 days or 8.1% annualized
Prob = 98%
Expectation = .98(26) - .01(474) - .01(237) = 25.5 - 4.7 - 2.3 = 18.5

Price................ Profit / Loss........... ROM %
90.00................... (474.00).............. -94.50%
118.00................. (474.00).............. -94.50%
120.00................. (474.00).............. -94.50%
124.74...................... 0.00.................. 0.00%
125.00.................... 26.00.................. 5.50%
145.00.................... 26.00.................. 5.50%
170.00.................... 26.00.................. 5.50%
200.00.................... 26.00.................. 5.50%
220.00.................... 26.00.................. 5.50%

Might be a better trade tomorrow.

 

[rolando87]

thanks for the example, i'm not an options trader but if I understand this correctly, as long as SPY doesn't drop below 125.00 by Sep 2016, you keep $26 per lot if not you loose exactly $474 per lot?

125 is 40% from the highs. Not a bad bet but the risk reward aint so pretty, if shit hits the fan.

 

[oldnemesis]

http://stockcharts.com/h-sc/ui?s=spy
That Sept 125/120 is now paying $46 (bid) and prob is at 92%
Looks like it still has a little further to go.