SPY SEP bear put spread
Took another pot shot today after the gap fill today that the index reverses and makes some retracement lower from here soon.
Bought a bearish put spread on SPY : 20 SEP 19 285/284 PUT @.25
The risk:reward ratio is only 17%, long at the 26 delta, paying less than 1/3 the width.
The market is pricing in a probability of collecting the full payout at 14% and 33% chance of collecting double the initial debt.
Breakeven is 284.75, approximately 2.55% below current SPY price of $292.19
Technically the gap is filled now and the SPY price is above today's R1 level. The index has already completed a 50% retracement of the prior move from the June ATHs to the lows of this week. The hourly buying volume is relatively weak compared to the average and the selling volume earlier this week. The May-June pattern comes to mind at this point where in May-June the index resumed selling much deeper than this after some consolidation. The selling volume this week was much much stronger than we than three months ago. Perhaps some further selling ahead after some consolidation here?
Still feeling bearish here on SPY after this buying action today I wondered:
What's the better play right now with the VIX 18% at above average?
Do I buy the bear put spread or sell the call spread?
A) Collect 1/3 the width now shorting the 26 delta with SELL -1 VERTICAL SPY 100 20 SEP 19 300/301 CALL @.34.
OR
B) Pay < 1/3 the width now buying the 35 delta put spread with BUY +1 VERTICAL SPY 100 20 SEP 19 285/284 PUT @.26
First example you collect theta but take on sizable risk with a sustained rally higher.
Second example you pay a little but the reward is worth it if the SPY resumes selling back to lows.
What do you think? Thanks for reading, and best luck with trading!
Bought a bearish put spread on SPY : 20 SEP 19 285/284 PUT @.25
The risk:reward ratio is only 17%, long at the 26 delta, paying less than 1/3 the width.
The market is pricing in a probability of collecting the full payout at 14% and 33% chance of collecting double the initial debt.
Breakeven is 284.75, approximately 2.55% below current SPY price of $292.19
Technically the gap is filled now and the SPY price is above today's R1 level. The index has already completed a 50% retracement of the prior move from the June ATHs to the lows of this week. The hourly buying volume is relatively weak compared to the average and the selling volume earlier this week. The May-June pattern comes to mind at this point where in May-June the index resumed selling much deeper than this after some consolidation. The selling volume this week was much much stronger than we than three months ago. Perhaps some further selling ahead after some consolidation here?
Still feeling bearish here on SPY after this buying action today I wondered:
What's the better play right now with the VIX 18% at above average?
Do I buy the bear put spread or sell the call spread?
A) Collect 1/3 the width now shorting the 26 delta with SELL -1 VERTICAL SPY 100 20 SEP 19 300/301 CALL @.34.
OR
B) Pay < 1/3 the width now buying the 35 delta put spread with BUY +1 VERTICAL SPY 100 20 SEP 19 285/284 PUT @.26
First example you collect theta but take on sizable risk with a sustained rally higher.
Second example you pay a little but the reward is worth it if the SPY resumes selling back to lows.
What do you think? Thanks for reading, and best luck with trading!
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