Cabot Options Institute Quant Trader – Trade Alert (SPY)
SPDR S&P 500 ETF (SPY)
We’ve held on as long as we could, but we’ve hit our stop loss, so it’s time to close our SPY December 15, 2023, 456/461 trade. Earlier in the week, SPY dropped down to roughly 454, so we thought we were on the dancefloor. Unfortunately, the 454 area acted as a strong area of support throughout the week so we never saw any true decline that would have helped the position.
SPY has rallied over roughly 6% since we added the trade back on November 6 and 12.4% since the rally began in earnest 29 trading days ago. But oftentimes, even a trade that has an 87.33% probability of success can’t withstand sharp directional rallies over a short period of time.
Thankfully, our portfolio, since inception, continues to see a nice return, but there is no doubt we’ve pulled back from the highs set just a few months ago. Sequence risk has certainly played a factor with three straight losing trades. But this is certainly nothing new. Losing trades will occur, in fact, they are one of the guarantees of investing in general, but we know that over time, as always, the Law of Large Numbers will play out accordingly.
The Trade
Simultaneously:
Buy to Close SPY December 15, 2023, 456 call strike
Sell to Close SPY December 15, 2023, 461 call strike for a total of $3.08. (As always, the price of the spread will vary, so please adjust accordingly.)
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.