S&P 500 ETF (SPY)
I’m going to hold on to my March SPY iron condor and will close towards the end of the trading session tomorrow or Friday depending on the price action over the next two days. When I do close, I only plan on closing the bear call side and will allow the bull put side to expire worthless.
For those that wish to close the trade now here is the trade:
Simultaneously:
- Buy to Close SPY March 15, 2024, 505 call strike
- Sell to Close SPY March 15, 2024, 510 call strike … for a total of $4.86 (As always, the price of the spread can vary from the time of the alert, so please adjust accordingly.)
S&P 500 ETF (SPY) – New Trade
I’m adding a new bear call spread to the mix and intend on adding several more trades over the coming days.
IV: 14.9%
IV Rank: 24.1
Expected Move (Range): The expected move (range) for the March 15, 2024, expiration cycle is from 495 to 537.
Call Side:
The Trade
Simultaneously:
- Sell to Open SPY May 17, 2024, 535 call strike
- Buy to Open SPY May 17, 2024, 540 call strike … for a total of $1.33. (As always, the price of the spread can vary from the time of the alert, so please adjust accordingly if you wish to take on a position.)
*Our margin of error is roughly 3.5% to the upside
Delta of spread: -0.07
Probability of Profit: 72.31% (upside)
Probability of Touch: 51.59% (call side)
Total net credit: $1.33
Total risk per spread: $367
Max return: 36.2%
Risk Management
Since we know how much we stand to make and lose prior to order entry we can precisely define our position size on every trade we place. Position size is the most important factor when managing risk, so keeping each trade at a reasonable level allows not only the Law of Large Numbers to work in your favor … it also allows you to sleep well at night.
I tend to set a stop-loss that sits 1 to 2 times my original credit. Since I’m selling the bear call spread for roughly $1.33, if my bear call reaches approximately $2.66 to $3.99, I will exit the trade. As always, I will keep you updated on the status of the position (in the weekly reports) as it progresses and send any necessary updates.
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