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BookingAlpha Option Trading Advisory

Wednesday, July 8, 2015

August 2015 SPX Credit Put spread

Today I entered the first position of the August 2015 monthly options expiration cycle:
Sorry I meant the second position:

Trade Details:
Buy 2 August SPX 1815 Put @7.57
Sell 2 August SPX 1825 Put @8.17

Credit: 0.60. (Total: $120)
Max Risk: 9.40 (Total: $1880)
Days to expiration: 43

Well, I'm pulling the trigger here, attracted by the extreme pessimism reflected in only 21% of the stocks trading above their 20 Day Moving Average.

SPX defended 2040 support pretty well yesterday and today. As usual, we may fall from here, but I have given myself decent cushion for error.

Here's the chart of the SPX index after market close today, July 8, 2015 for my own future reference and self study:

(Click on image to enlarge)

I think there is still a bit more downside room because of this red bar closing near the lows today. Plus the McClellan oscillator not below -150 yet, showing some downside room. But I don't want to miss out on what seems to be a decently safe opportunity here.

Current positions in the Portfolio:

July SPX 1935/1940/2220/2225 unbalanced Iron Condor 
$220 credit, 95% probability of success with only 8 days to expiration. I still like my odds here and I feel comfortable holding this position.

August RUT 1150/1160/1350/1360 unbalanced Iron Condor

$254 credit, 67% probability of success and 43 days to expiration. I may need to adjust the Put side if RUT keeps falling. My candidate for the adjustment would be 1080/1070 or perhaps 1070/1060 Put spread on the same August expiration cycle.

August SPX 1815/1825 Credit Put spread
The trade discussed in this article.
$120 credit, 89% probability of success and 43 days to expiration. Lots of baby sitting ahead.

I'm glad that July expiration is close because that will reduce some exposure on the portfolio. Every time you open a new position, every single time, you are taking additional risk. You are aiming for better returns at the expense of potential greater draw-downs.

Check out 2015 Track record

Related Articles:
Weekend Portfolio Analysis (July 18, 2015)
Closed the position early for profit (July 23, 2015)

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  1. The trade you made today was a very high probability trade. It has an excellent chance of surviving this market correction.

    If RUT drops below 1200 this week or next week, it might be be time to adjust the August 1160/1150 cps.

    1. Well, historically there has been a high correlation between you celebrating one of my plays and it ending up wrong lol. We'll see with these ones. Been following your moves with interest lately, some of them looking even safer.

  2. By saying there is an 89% probability that the AUG 1815 / 1825 put will expire OOM, are you saying that you sold a 11 delta?

    1. Yes. 10 point something percent probability of expiring in the money, which is the stat that I use.