The major equity index prices have pulled back significantly from recent highs that have been firm resistance since early September. We will attempt to take advantage of the opportunity to generate gains from our November SPY call credit spread. After opening the call spread near the top of the recent trading range, the S&P 500 index price drop over the past few days has triggered the exit rule.
If we can immediately close the call spread, then if equity prices surge back higher over the next few days we may be able generate more gains by doing another November SPY call spread. Also, if the S&P 500 index continues to pull back and threatens our SPY put spread, we have extra funds to support a trade adjustment if necessary.
SPY Position Update -------------------------------------------------------------
SPY closed at $141.42 on Tuesday â€“ the November position is approx $1,000 in the black
The October 17th Couch Potato published a November expiration SPY bear call spread
Unless equity prices bounce back we plan on closing out this position for an approx. $900 gain as soon as the trade is available (see tables below)
SPY Risk Analysis
As you can see in the SPY daily chart above, the day after we executed the call spread the S&P 500 index crashed and has triggered our exit rule to cash in gains from this trade. As mentioned above, unless prices gap higher in the morning the plan is to close out the call spread. We mentioned above the optimum scenario would be to immediately close out the current call spread, and then execute another November SPY call spread if equity prices rebound over the next few days.
As discussed above, the exit rule for the November SPY bear call spread is triggered and unless the S&P 500 index bounces back tomorrow we will try to close out this position.
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.