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.