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Friday, November 23, 2018

January 2019 SPX Credit Put spread

First trade using 2019 options. New year, fresh start!
I decided to start it off with a Credit Put spread. Even though we are not 100% extreme oversold we are almost there and with the VIX above 21 it is just an attractive proposition very far out of the money.

Trade Details:
SELL 4 January SPX 2310/2300 Credit Put spreads @0.70

Credit:          $280 (0.70 x 4 x 100)
Max Risk: $3,720 (9.30 x 4 x 100)

The max risk in this position is $3720 and the return (or loss) will be based on this "investment". Of course, in case of loss I would never allow it to reach that maximum and some defense would be applied in advance. But for the purpose of calculating a % return on risk at the end, this amount of $3,720 will be used.

(Click on image to enlarge)

SPX Chart for future reference:
(Click on image to enlarge)

Trade Update (December 24, 2018)

Closed the Jan SPX 2310/2300 Credit Put spread @2.25 debit
Net loss of 1.55 per spread. $620 loss in 4 spreads.

Deployed  a Jan 2100/2090 Credit Put spread @0.60 credit
Credit:          $240 (0.60 x 4 x 100)
Max Risk: $3,760 (9.40 x 4 x 100)

Trade Update (January 18, 2018)

With SPX way past 2600 on January expiration, the Jan 2100/2090 Credit Put spread expires worthless.
Max profit made 0.60 x 4 x 100 = $240

Summing up the whole evolution of the trade:

- SPX 2310/2300 Credit Put spread sold for 0.70 credit and closed at 2.25 debit. This brought a 1.55 loss per spread ($620 in 4 spreads)

- SPX 2100/2090 was sold for 0.60 credit which expired worthless. This brings a profit of $240.

Combining both things it is a $380 loss, and the Max Risk ever assumed on the position was $3760. This is therefore a -10.1% return on risk.

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