Put Ratio on SPY (86% Probability)
Updated
New Year, and the market continues to go up with no mercy. With the over extension of the 20 EMA, Eventually it will have to make a correction, so I am trying to pin the down move for max profit at the nearest high volume area. Implied Volatility is still very low with the VIX at ~9 and IVR of 14, but we have to keep trading. Would make money as long as we stay above $262.40 in the next 42 days.
The Trade:
42 days to Expiration
+1 269 Put
-2 266 Put
For a .64 Credit
Probability of profit 86%
Max Profit $364 at the 266 Price point
The Trade:
42 days to Expiration
+1 269 Put
-2 266 Put
For a .64 Credit
Probability of profit 86%
Max Profit $364 at the 266 Price point
Trade active
Price have continued to move up, and this trade is already making Profits. So the decisions are:1. I can leave it, since is already a higher probability to make profits (97%) and wait to see if we get lucky on a down move to get to our max profit potential.
2. Close it, take the small profit. Nothing wrong with winning.
3. Do something Else, and turn this trade into something else to add to our profits.
I decided to go with #3, and added a Short Call for an additional $1.05 credit. I am leaving the ratio as it is, just in case we get lucky with a down move and also will help with our tested trade on QQQ.
We are adding risk to the upside, but our Capital requirements did not change, effectively not using more capital to do this trade.
Trade active
The Put Ratio is making money, but I won't close it yet just in case price goes down to the 266 price where I have my max profit.However the call that I added was starting to get tested, so I took advantage of the increased in volatility to roll the Feb 285 Call into the March 288 Call for a credit of $ 0.20.
I am improving the probabilities of the call, mainly because I am battling the QQQ trade, so in case this market continues going up, I didn't want to lose in both trades. If it goes down to hard and I get whipsaw on QQQ then I have my Put ratio to save me.
Trade active
This is how my break evens look like now with the adjustments.Trade closed: target reached
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