* UPDATE SPY - Shutting the Weekly Trade Down

Discussion in 'Options' started by livevol_ophir, Aug 13, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    SPY is trading $108.59, with IV30&#8482 down 2.2%.

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TGWSwuUG8CI/AAAAAAAAEF0/VKdQpsb71-E/s1600/spy_summary_8-132010.gif">

    Yesterday we looked at this trade: <b><a href="http://livevol.blogspot.com/2010/08/spy.html">SPY trading weeklies</a></b>.

    Let's close this down; we got essentially exactly what we wanted; small down and front month goes away worthless. The Options Tab is included below:

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TGWSwpXWmeI/AAAAAAAAEF8/uSQlpqpioCQ/s1600/spy_options_8-13-2010.gif">

    <b>Thursday Trade</b>
    Buy 1 SPY Monthly 110 put for $2.31
    Sell 1 SPY Weekly 108 put at $0.47
    Sell 1 SPY Weekly 106 put at $0.11
    Total debit: $1.73

    <b>Close Today</b>
    Sell 1 SPY Aug (Monthly) 110 put @ $2.17
    Let the rest expire worthless or if you have to, go head and pay $0.09 for the Aug 108 weekly.

    If everything goes as planned and expires worthless, the return is $2.17 - $1.73 = $0.44 or 20% in one day. Buying back the weekly 108 put takes the return to $0.35 or 16% in one day.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here: