TRADE IDEA: SPY APRIL 21ST 230/233 SHORT PUT VERT
This is a defined risk variation on a Tom Preston (Dough/TastyWorks) play, where he sells the monthly SPY put with a 68% probability of expiring worthless. He generally does this on the Monday following the monthly opex; I'm doing it a few days early ... .
While I'm using it as a delta hedge of a core SPY position (I'm in need of a touch of long delta), it's also fairly good as a stand alone trade:
Metrics:
Probability of Profit: 71%
Max Profit: $51/contract
Max Loss/Buying Power Effect: $249/contract
Break Even: 232.49
Theta: .36
Delta: 8.53
Notes: I will watch this position against the backdrop of my SPY core position, which I look at each week to "tweak" back to between delta neutral and slightly delta short, generally by rolling sides toward current price where that makes sense (i.e., it pays enough and there is enough time remaining in the setup). If I skew back to net delta long, I will look at legging into a short call side to complete an iron condor, but will otherwise leave it alone running into expiry. I would note that the implied volatility isn't great here (an understatement) ... .
While I'm using it as a delta hedge of a core SPY position (I'm in need of a touch of long delta), it's also fairly good as a stand alone trade:
Metrics:
Probability of Profit: 71%
Max Profit: $51/contract
Max Loss/Buying Power Effect: $249/contract
Break Even: 232.49
Theta: .36
Delta: 8.53
Notes: I will watch this position against the backdrop of my SPY core position, which I look at each week to "tweak" back to between delta neutral and slightly delta short, generally by rolling sides toward current price where that makes sense (i.e., it pays enough and there is enough time remaining in the setup). If I skew back to net delta long, I will look at legging into a short call side to complete an iron condor, but will otherwise leave it alone running into expiry. I would note that the implied volatility isn't great here (an understatement) ... .
Comment:
Filled for .55/contract.
Comment:
It's never the best place to sell call side on market weakness, but erecting some protection for this setup here (as well as picking up a touch of short delta to keep the entire SPY core position net delta neutral to short): opening April 21st 240/243 short call vert for a .41 ($41)/contract credit. I'm doing this buying power free, since I'm selling an oppositional spread against in the same expiry with the same width (3-wide).
Trade closed manually:
Covering here for a .48 db (50% max) for the entire 230/233/240/243 iron condor.