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BookingAlpha Option Trading Advisory

Friday, February 14, 2014

SPY Credit Call spread (pending GTC Order)

Today I am leaving a pending order (Good Till Cancelled) on an SPY Bear Call spread.
The order is for the March SPY 192/194 Credit Call spread and 0.15 credit.

Obviously the price of that spread is far from 0.15, right now it is 0.07.
I won't be in Canada and will have limited or non existent internet connectivity, that's why I am leaving this as a pending order. I would have probably played the 191/193 spread if I had the chance to look at the markets and be on top of my positions. Just so I don't lose the opportunity. But, like I said, I wont be here and 192 makes me feel better.

Anyways the market would need a 1% push higher for my 192/194 spread to have a shot at being filled. If it is filled, SPY will be around 185. I am pretty sure I can be back in 8 days and the market won't be at 192, so I am not concerned that this position, if filled, will get in the money in 8 days.

Stochastics are at 94
McClellan at +178
And 60% of the stocks are trading above their 20 DMA. This is showing that there is still a little room for a push higher.

If filled, this position would complete an Iron Condor with the 159/161 Bull Put spread.

Finally a chart of SPY before market open for future reference.
(Click on image to enlarge)

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  1. I will deploy some bear call spreads on SPX/SPY if we approach the all-time high too. This market appears to be slightly overbought.

  2. Just wondering, how do you know that 60% of stocks are trading above 20 DMA?

  3. Can you share in general how you pick your strikes? I know you will sell bear call spreads when market is deemed to be overbought and bull put spreads when it is oversold. But how do you determine the distance away from current market? Is it through the probability of OTM/ITM on the TOS platform?

  4. Hi Andrew,

    Yes, I used the probability of being in the money by expiration. I generally go with 10% Probability ITM for both my short Calls and my short Puts.


  5. Thanks LT. I aim for that 10% prob of ITM as well.