SPY

[oldnemesis]

http://finance.yahoo.com/echarts?s=SPY+Interactive#{"range":"2y","allowChartStacking":true}

Brexit, interest rates and the Fed etc. etc. etc.

The market has been knocking against 215 for 2 years... it doesn't want to go any higher.

It's summer time. Time to pack it in until fall.

Trade:
with SPY at 206.52
Sept 215/205 bear put spread at a net debit of $497

Price................ Profit / Loss.......... ROI %
150.00.................. 503.00............. 101.21%
175.00.................. 503.00............. 101.21%
200.00.................. 503.00............. 101.21%
205.00.................. 503.00............. 101.21%
210.03..................... 0.00................. 0.00%
215.00................. (497.00)........... -100.00%
225.00................. (497.00)........... -100.00%
250.00................. (497.00)........... -100.00%
275.00................. (497.00)........... -100.00%

Prob = 47%
Expectation = .47(503) - .3(497) -.23(500) = 236 - 149 - 115 = -28

 

[oldnemesis]

Alternate trade:

Sept 215/220 bear call spread for a net credit of 139

Price............... Profit / Loss......... ROM %
154.89................. 139.00............. 27.80%
177.94................. 139.00............. 27.80%
202.21................. 139.00............. 27.80%
215.00................. 139.00............. 27.80%
216.39..................... 0.00.............. 0.00%
220.00................ (361.00)........... -72.20%
226.47................ (361.00)........... -72.20%
250.74................ (361.00)........... -72.20%
275.00................ (361.00)........... -72.20%

Prob = 70%
Expectation = .7(139) - .22(361) - .08(181) = 97.3 - 79.4 - 14.5 = 3.4

Thus it makes little difference if you choose a credit spread or a debit spread in terms of expectation. Between these two trades there is a slight 'edge' towards the credit spread.

 

[OptionGuru]

• Together the trade would "almost" be a box - correct?
• A box being similar put and call strikes.

One thing I learned on ET that I would never have figure out on my own is that both sides of a box are identical even though one is ITM and the other OTM.

PS ........ Selling SPY credit spreads gives me the willies.

 

[oldnemesis]

• Together the trade would "almost" be a box - correct?
• A box being similar put and call strikes.

One thing I learned on ET that I would never have figure out on my own is that both sides of a box are identical even though one is ITM and the other OTM.

PS ........ Selling SPY credit spreads gives me the willies.

No:

A box is a bullish spread and a bearish spread together. These trades are both bearish.

http://www.theoptionsguide.com/box-spread.aspx