http://finance.yahoo.com/echarts?s=SPY+Interactive#{"range":"10y","allowChartStacking":true} http://stockcharts.com/h-sc/ui?s=spy Trade: With SPY at 188.83 Sept 125/120 bull put spread for a net credit of $26 Yield = 26/474 = 5.5% in 247 days or 8.1% annualized Prob = 98% Expectation = .98(26) - .01(474) - .01(237) = 25.5 - 4.7 - 2.3 = 18.5 Price................ Profit / Loss........... ROM % 90.00................... (474.00).............. -94.50% 118.00................. (474.00).............. -94.50% 120.00................. (474.00).............. -94.50% 124.74...................... 0.00.................. 0.00% 125.00.................... 26.00.................. 5.50% 145.00.................... 26.00.................. 5.50% 170.00.................... 26.00.................. 5.50% 200.00.................... 26.00.................. 5.50% 220.00.................... 26.00.................. 5.50% Might be a better trade tomorrow.
thanks for the example, i'm not an options trader but if I understand this correctly, as long as SPY doesn't drop below 125.00 by Sep 2016, you keep $26 per lot if not you loose exactly $474 per lot? 125 is 40% from the highs. Not a bad bet but the risk reward aint so pretty, if shit hits the fan.
http://stockcharts.com/h-sc/ui?s=spy That Sept 125/120 is now paying $46 (bid) and prob is at 92% Looks like it still has a little further to go.