SPY Spread Look Back Trade

SPY 6/3/2016

I made one more SPY trade on 6/3/16 in order to show the difference in how different time frames and strikes worked on this type of trade. When I entered this trade SPY was at $210.48 and like above I felt that it was going to move down off of a retrace. On this trade I did not take the risk of an ‘in the money’ trade which reduced my potential profit and increased my risk because of a smaller credit. Risk on this trade was $755.14; the reason it was so close to the above trade was because I reduced my contracts from five to four which cut beginning risk by $200.00.

For this trade I bought the June week 3 $214.00 Call for $0.24 and sold the June week 2 Call for $0.39 giving me a slight credit of $44.86 on four contracts. On 6/10/16 I waited for the SPY to drop to $209.83; it had continued down after I closed the trade above. I could have just waited for my $212.00 to expire worthless but that meant I would have to keep my $214.00 long until Monday and I was afraid that the market would continue down over the weekend so I decided to close for what I could get.

On 6/10 I repurchased the June week 2 $212.00 for $0.01 and sold the June week 3 $214.00 for $0.10 which left me with a total credit of $65.72. I know that does not sound like much but it was a 8.7% return in seven days and this trade could have been scaled up substantially because of the liquidity the SPY.

Date

Sym

Exp.

Strike

Price

Contracts

Type

Cost

Balance

06/03/16

SPY

BTO

6WK3

214

-$0.24

4

Call

-$103.56

-$103.56

06/03/16

SPY

STO

6WK2

212

$0.39

4

Call

$148.42

$44.86

06/10/16

SPY

BTC

6WK2

212

-$0.01

4

Call

$11.56

$33.30

06/10/16

SPY

STC

6WK3

214

$0.10

4

Call

$32.42

$65.72

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