February options expire tomorrow and we need to close out the SPY and DIA short calls. Last night, futures signaled a follow through on Wednesday's down day, but a series of favorable economic reports plus a positive vibe from the Euro zone pushed stocks higher and higher as today's trading day progressed. As confirmed in the 60 min. stock charts below, both the SPY and DIA closed right above our short call strike prices.
SPY Position Update
SPY closed at $136.05 on Thursday
The January 17th Couch Potato published a February expiration SPY bear call spread
On February14th we suggested either closing out the $134 strike price short call and exiting the position, or rolling up the short call to the $136 strike price (see tables below)
DIA Position Update
DIA closed at $129.07 on Thursday
The January 23rd Couch Potato published a February expiration DIA bear call spread
February options expire tomorrow and we cannot let the SPY and/or DIA short calls expire in the money at the close of trading. If prices are .01 above the strike price of the short call you can expect to be automatically assigned by your broker.
At this point, job one is to mitigate potential losses, therefore if stocks open with a gap higher tomorrow the smart move is to immediately exit all short positions. Conversely, if the market gaps down and prices don't fill the gap, closing out the short calls in the afternoon prior to market close should be a good strategy. However if stocks are flat at the open, we usually wait to see if there is an intraday price pullback for which to close out the short contracts. If prices start out flat and don't recede after the first hour of so of trading, then we usually eliminate any further risk by closing out the positions.
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.