The market is breaking down into full-fledged correction mode and we need to plan an exit for our May expiration SPY and DIA put spreads.
SPY Position Update
SPY closed at $130.86 on Thursday
The April 18th Couch Potato published a May expiration SPY bear call spread
On May 7th we suggested immediately closing out the call spread for an approx. $1,000 gain (see tables below)
The April 18th Couch Potato published a May expiration SPY bull put spread
The put spread is approx. $3,300 in the red (see tables below)
$133 strike price short put delta is -.8162 (18% probability this position will be profitable)
We are rolling the $133 short put down to the one-week May 25th expiration $127 strike price and increasing the number of contracts
After the trade adjustment the total position should be approx. $700 in the red
May options expire tomorrow and we are closing out the opening put spread to avoid a chance of assignment on $133 short put. As mentioned above, we are planning a trade adjustment to minimize the loss. However if prices rise significantly then you can just close out the put spread (without the trade adjustment). Or if prices drop sharply then we will probably initiate the put spread at lower strike prices with a similar risk profile as described above
DIA Position Update ---------------------------------------------------------
DIA closed at $127.57 on Thursday
The April 25th Couch Potato published a May expiration DIA bear call spread
On May 9th we suggested immediately closing out the call spread for an approx. $1,000 gain (see tables below)
The April 25th Couch Potato published a May expiration DIA bull put spread
On May 15th the Couch Potato published a put spread trade adjustment
The adjusted put spread is approx. $1,200 in the red (see tables below)
Trade adjustment $125 strike price short put delta is -.5649 (44% probability this position will be profitable)
If the $125 short put stays in the money tomorrow, it needs to be closed out to avoid assignment
Similar to the SPY above, the May DIA put options expire tomorrow and we plan on exiting the $125 put spread to avoid a chance of assignment. Tomorrow, if prices rise significantly we will try to hold off and get a better price, however if the market crashes again, getting out ASAP is the best move.
Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.