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Thursday, July 23, 2015

Closed August SPX 1815/1825 Credit Put spread for profit

Well, it is an unusually active week for me. Yesterday I entered the first trade of the September monthly options expiration cycle and just one day later I'm making another trade but this time it is a closing play.

As you know I typically like to squeeze all the profit I can out of a position by riding it all the way to expiration but there are a few exceptions. In yesterday's article I talked about the idea of closing the August SPX 1815/1825 Credit Put spread early, as I had three different Put spreads on and there were still 30 days left until at least one of them expired. Well, today I finally closed that Put spread for 0.10 debit. The net profit was 0.50 as it was originally sold for 0.60 credit exactly 15 days ago.

I see this move more as an offensive play than a defensive one. Why? well, I'm not really playing defense with this spread because at the 1825 level it looked really safe and unlikely to be threatened. So, I'm not feeling any heat on this spread or anything. The game plan here is to take profits and eliminate one position so that I can sell a Put spread again should the market keep falling. This move in other words, will allow me to attack again and collect new credit, which I wouldn't do if the market fell and I had already three positions on being so far from expiration.

So, that's the rationale. I tried to close it for 0.05 debit all day long but didn't get filled. I changed my order to 0.10 debit and got filled immediately. So, 0.50 profit out of a maximum 0.60, that's 83% of max profit achieved in just 15 days.

Now I will be glad to sell SPX August options around 1900 or the high 1800's if SPX falls about 3% in the next few days.

Current positions in the Portfolio:

August RUT 1150/1160/1350/1360 unbalanced Iron Condor
$254 credit, 88% probability of success and 29 days to expiration. Looking good. Will adjust if RUT reaches 1330 or falls to around 1200.

September RUT 1120/1130/1330/1340 unbalanced Iron Condor
The trade entered yesterday. $235 credit received, 57 days to expiration. 78% probability of success. Lots of baby-sitting ahead.

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  1. Well played Henrik. I like to close almost all my spreads instead of letting it expire. This frees up margin and allows me to sell more spreads when the market becomes overbought or oversold.

    1. Yes, I have noticed that you close early most of the time and I see how that makes sense. Just because I'm not too active, most of the time I don't anticipate having he chance for another trade on the same cycle and I just let things expire (provided I don't feel threatened).

      I guess, if it works well for you, keep it going!!
      Thx for your comment.