SPX Analysis

Update 11/4/2015: SPX moved contrary to my bearish position in October and I have exited this position to avoid expiration.

Shares rose by 12.0% over 36 days, or a +122% annual rate. The options position produced a -141.7% loss on debit, for a -1,436% annual rate.

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I continue to be bearish the S&P 500 based on the trend and am rolling forward to a later options series on SPX -- options on the index futures.

[S&P 500 in Wikipedia]

SPX

I shall use the NOV2 series of options, which trades for the last time 45 days hence, on Nov. 14.

Ranges

Click on chart to enlarge.

SPX at 11:55 a.m. New York time, 30 days hourly bars

Implied volatility stands at 26.3%. SPX’s volatility stands in the 60th percentile of its annual range.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart	Earns
Upper	2,064.49	2,238.96	2,020.86	N/A
Lower	1,715.55	1,541.08	1,867.01	N/A
Gain/loss	9.2%	18.5%

Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move
The Trade

Bear call spread, short the $1,925 calls and long the $1,950 calls,
sold for a credit and expiring Nov. 15.
Probability of expiring out-of-the-money

NOV2	Strike	OTM
	1925	63.8%

The premium is $10.35, which is 41% of the width of the position’s wings. The stock at the time of purchase was priced at $1,882.04.

The risk/reward ratio is 1.4:1.

Decision for My Account

I've opened a position in SPX as described above.

-- Tim Bovee, Portland, Oregon, Sept. 29, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



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Based on a work at www.timbovee.com.