SPY Spread Look Back Trade

SPY 6/3/2016

On 6/3/16 I decided to place a trade in the SPY to take advantage of time decay between two Call positions. The SPY was trading at $209.89 and I believed that the market would continue down from there. I sold the June week 2 expiration $211.00 Call for $0.59 and purchased the July week 2 expiration $213.00 Call to cover it for $1.06. My hope was that the stock would stay below my $211.00 short call but not to far below so my $213.00 would not lose to much value.

On 6/8/16 the market broke up to $212.00 which was bad for the position, but I decided to wait it out. On 6/10/16 the market broke down and I was able to close my $211.00 Calls for $0.14 and then sell the June week 3 $211.00 Call for $0.87 against my $213.00 long calls. By 6/13/16 the market was trading slightly down and there was an interest rate announcement coming which was causing me to consider closing the position.

On 6/16/16 I decided it was time to exit with the SPY down to $205.82. This was great for my short position but was starting to erode my long too fast as it moved more out of the money. I was able to close my short for $0.02 and sell my long $213.00 call for $0.50. After commissions I was able to clear about $0.65 on my 10 contracts. This left me a profit of $658.57 on this trade in just 13 days. My risk as I adjusted but using my max risk of about $2,500.00 this trade gave me a 26.34% return over that time period.

See chart below for trade:

Date

Sym

Exp.

Strike

Price

Contracts

Type

Cost

Balance

06/03/16

SPY

STO

6WK2

211

$0.59

10

Call

$574.75

$574.05

06/03/16

SPY

BTO

7WK2

213

-$1.06

10

Call

-$1,075.23

-$500.48

06/10/16

SPY

BTC

6WK2

211

-$0.14

10

Call

-$155.23

-$655.71

06/10/16

SPY

STO

6WK3

211

$0.87

10

Call

$854.75

$199.04

06/16/16

SPY

STC

6WK3

211

-$0.02

10

Call

-$25.23

$173.81

06/16/16

SPY

STC

7WK2

213

$0.50

10

Call

$484.76

$658.57

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