SPY ETF Trade Setup
We are opening a July option expiration month SPY bear call spread
SPY closed at $133.17 on Wednesday (24 days to July expiration)
SPY is priced ABOVE its current 14-day EMA (see SPY chart down below)
SPY is trading ABOVE its 20-day Bollinger Band SMA (see SPY chart)
SPY is priced just BELOW its 50-day simple moving average (see SPY chart)
SPY is ABOVE its 200-day simple moving average (see SPY chart)
Relative Strength Indicator (RSI) is neutral (See SPY chart)
Moving Average Convergence/Divergence (MACD) is neutral (See SPY chart)

30 day Historical Volatility is 17.93%, Implied Volatility is 18.70% - both numbers are near the middle of their 52-week range which is considered neutral

We want the SPY call spread to generate a minimum .50 net credit on each leg AND we prefer that the short strikes fit our statistical probability profile (80% chance all the options will expire worthless and we get to keep most of the sold premium). The spread in tables below comply with our trading rules for initiating a July expiration month option series SPY bear call spread (based on Wednesday's closing prices). The suggestion is to submit an order to purchase/sell the option strikes prices below. Please confirm the correct option symbols with your broker.

Premium Credit $.62
Total Option Premium Received $1,230 (Excludes commissions and fees)
Maximum Risk $7,770 (includes premium received for the July SPY bull put spread)
Margin Requirement $10,000 (this is the same margin used for the bull put spread)
20 contracts traded on each leg (number of contracts can be increased or decreased based on risk tolerance and/or funds available to trade; this will impact Total Premium Received, Maximum Risk amount, and Margin Required)

GLD ETF Trade Setup ---------------------------------------------------------
We are opening a July option expiration month GLD bull put spread
GLD closed at $152.83 on Wednesday (24 days to July expiration)
GLD is priced BELOW its current 14-day EMA (see GLD chart down below)
GLD is trading BELOW its 20-day Bollinger Band SMA (see GLD chart)
GLD is priced BELOW its 50-day SMA (see GLD chart)
GLD is BELOW its 200-day simple moving average (see GLD chart)
Relative Strength Indicator (RSI) is bearish (See GLD chart)
Moving Average Convergence/Divergence (MACD) is bearish (See GLD chart)

30 day Historical Volatility is 18.58%, Implied Volatility is 18.14% - both volatility numbers are near the middle of their 52-week range which is considered neutral

We want the GLD put spread to generate a minimum .50 net credit on each leg AND we prefer that the short strikes fit our statistical probability profile (80% chance all the options will expire worthless and we get to keep most of the sold premium). The spread in tables below comply with our trading rules for initiating a July expiration month option series GLD bull put spread (based on Wednesday's closing prices). The suggestion is to submit an order to purchase/sell the option strikes prices below. Please confirm the correct option symbols with your broker.

Premium Credit $.62
Total Option Premium Received $1,240 (Excludes commissions and fees)
Maximum Risk $8,760
Margin Requirement $10,000
20 contracts traded on each leg (number of contracts can be increased or decreased based on risk tolerance and/or funds available to trade; this will impact Total Premium Received, Maximum Risk amount, and Margin Required)

Exit Plan
As with initiating the trade, the decision process for exiting our SPY and GLD credit spreads will be simple:

Anytime the market maker is willing to accept a limit price of less than .11 on one of our short strikes, buy back all the short contracts and sell the long positions on the same spread. However, if it is a few days prior to the expiration date, we may be able to hold out for a .05 bid.

If one of our short strikes is penetrated (closing price above a short call or below the short put) AND the delta rises to .65 we will look to close out this spread (buy the short contracts, sell the long) and roll it out to another short strike price. Unless this is option expiration week, do not panic and rush to close the trade, many times the market will reverse itself and remove the sense of urgency. If one of our short strikes has been violated and there is no price reversal, we cut our losses and live to fight another day.

Final Comment
If prices gap down tomorrow the SPY call spread may not be available as published and we will hold off on this trade. Conversely if prices rise sharply then we will probably initiate the call spread at a higher strike price with a similar risk profile as described above.

If prices gap up tomorrow the GLD put spread may not be available as published and unless the gap is filled we will hold off on the trade. Conversely if prices drop sharply then we will probably initiate the put spread at a lower strike prices with a similar risk profile as described above.

Gregory Clay

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.