SPY Spread Look Back Trade

SPY 06/03/2016

In addition to the SPY trade above I also traded one with a shorter time frame and with the short ‘in the money’. The one above I had about four weeks between the strikes. That gave me room to continue to sell against my Long position or the ability to wait for them market to rebound back toward my long if it suddenly dropped in price. I had no room for error on this trade. The risk on this trade was also slightly lower. For this trade I bought the June week 3 $212.00 call for $0.69 and sold the June week 2 $210.00 for $1.19 against it. When I opened this trade the market had a big down day and had retraced 50% up to $210.41 which is why I took the risk of selling the short ‘in the money’. My bet was the market would continue down after the retrace. This brought in more of a credit for me up front but I really needed the market to move down, and move down quickly to make money.

When placed the trade I received a credit of $234.76 for five contracts. My total risk was $765.24 because of the credit. On 6/8/16 the market had jumped up to $212.00 leaving me at maximum loss if it held. On 6/10/16 I got lucky and the market started back down like I thought it was going to on 6/3. I had the direction correct, my timing was just off. Fortunately, with options sometimes not having your timing right can still work out as long as you were correct in the end and understand the risk. On 6/10 the market was down $1.68, trading at $210.40 which was a penny below where it was when I entered the trade. I decided now was the time to close, just in case I was still wrong about the overall trend. I repurchased the June week 2 Call for $0.54 and sold my June week 3 Call for $0.48 leaving me with a net profit of $189.53 because of my initial credit. That gave me a $24.77% return after seven days even though I missed the timing on the trade.

Date

Sym

Action

Exp.

Strike

Price

Contracts

Type

Cost

Balance

06/03/16

SPY

BTO

6WK3

212

-$0.69

5

Call

-$352.61

-$352.61

06/03/16

SPY

STO

6WK2

210

$1.19

5

Call

$587.37

$234.76

06/10/16

SPY

BTC

6WK2

210

-$0.54

5

Call

-$277.61

-$42.85

06/10/16

SPY

STC

6WK3

212

$0.48

5

Call

$232.38

$189.53

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