Cabot Options Institute Quant Trader – Alert (DIA)
Dow Jones ETF (DIA)
Our DIA bear call spread has hit its stop-loss, so we are going to stay mechanical and exit the trade. With only 10 days left until expiration and some major economic data ahead, we don’t want to risk a gap up that pushes through our short strike and beyond, particularly with gamma accelerating as we near expiration. That being said, if you wish to hold on, please be aware of the risks.
Remember, using a high-probability approach is based on the law of large numbers, so we know the occasional losing trade will occur. However, it’s our job to limit the losses, so the tried and true, high-probability approach can actually make progress over the long-term.
Our overall returns continue to outperform, and our win ratio stands at 85.7%.
The Trade
Simultaneously:
Buy to close DIA April 21, 2023, 338 call strike
Sell to close DIA April 21, 2023, 343 call strike for a total of $2.05 (As always, the price of the spread will vary, so please adjust accordingly.)