As indicated in the SPY chart below, stocks are extremely oversold and due for a pullback, but prices are continuing to grind higher and hit our SPY call spread exit rule. February options expire next week and as illustrated below, the first order of business for us is to adjust the SPY call spread to minimize the potential loss.
SPY Position Update
SPY closed at $135.36 on Thursday- the June position is approx. $2,200 in the red
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 down below)
SPY is ABOVE its 50-day simple moving average (see SPY chart)
SPY is still ABOVE its 200-day simple moving average (see SPY chart)
Relative Strength Indicator (RSI) is extremely bullish (See SPY chart)
Moving Average Convergence/Divergence (MACD) is extremely bearish (See SPY chart)
The January 17th Couch Potato published a February expiration SPY bear call spread
The call spread is approx. $2,200 in the red (see tables below)
$134 strike price short call delta is .6849 (31% probability this position will be profitable)
We are rolling up the $134 short call to the $137 strike price AND increasing the number of contracts, but reducing the margin requirement
After the trade adjustment the total position should be approx. $900 in the red
As mentioned above, the SPY call spread exit rule is activated and the trade adjustment exceeds near term resistance and the current overbought conditions should help minimize further risk.
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.