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Thursday, February 4, 2016

May31 SPX Credit Call Spread

Today a Credit Call spread position was entered:

Trade Details:
Sell 5 SPX May31 2125 Call @6.25
Buy 5 SPX May31 2150 Call @3.75

Net Credit: 2.50 (Max profit of $1,250 in 5 contracts per leg)

This Credit Call spread creates an Unbalanced Iron Condor (8/8/5/5) with the May31 1500/1475 Credit Put spread. Because of this, no new margin is consumed, in fact the max risk is reduced a little bit.

During the weekend portfolio analysis I mentioned that my goal was to sell at or above 2150. I'm selling at 2125. Essentially, the Put side was in play from an adjustment to one of the January positions, so in reality I hadn't initiated a true May31 income position. Being in no man's land, it was time for an Iron Condor, but an Iron Condor today would have added a third Credit Put spread to the portfolio, so I went only with the Call side. I planned to sell 2150, but the market just keeps going nowhere and I wanted to put some capital to use. I also started to realize that I was being too conservative and afraid of selling Calls, when in fact, if the market rallies, I have three long option bullish plays to more than compensate. So no reason for my exaggerated fear. Plus, playing a smaller Call spread would reduce an eventual loss. (For a list of positions in the portfolio read the past weekend portfolio analysis)

If the market rallies hard from here, I will take some gains from the bullish long option plays. If it reaches an overbought condition I will sell additional Calls, around 2175 or higher.

SPX chart at market close for future reference
(Click on image to enlarge)

Trade Update - April 4, 2016
Bought 2 SPX 2150 Calls @5.60 debit ($1,120)
Sold   20 SPX 1890/1885 Credit Put spreads @0.35 credit ($700)

Resulting profit picture:

Trade Update - May 11, 2016
Sold to close 2 SPX 2150 Calls @1.15  (5.60 - 1.15 = 4.45 loss = -$890)
Bought to close  20 SPX 1890/1885 Credit Put spreads @0.05 (0.35 - 0.05 = 0.30 gain = +$600)
Bought to close    5 SPX 2125/2150 Credit Call spread @2.25 (2.50 - 2.25 = 0.25 gain = +$125)

Final profit picture while closing
Final result: -$165
Glad to close this position for a tiny loss after three months of struggle.

Check out 2016 Track Record 

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