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S&P 500 Index ETF (SPY) Iron Condor Trade

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S&P 500 Index ETF SPY Iron Condor Trade
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S&P 500 Index ETF (NYSE: SPY) Credit Spread

 

TheOptionPlayer.com sets up a SPY (SPY) ETF short-term (28-day) iron condor trade:

Sell the March Quarterly expiration SPY Bear Call spread for $.45 (yesterday's closing price)

AND

Sell the March Quarterly Bull Put spread at $.50 (yesterday's close)

The difference between funds received and paid out is a $.95 per share credit which we keep as long as the SPY ETF (SPY) closes between $155 and $146 on Friday March 28th. The margin requirement for this trade is $10,000 and the maximum risk is $1,890. Exit the Call spread if it appears the price will end up above the trading range Or exit the Put spread side if it appears the price will end up below the trading range.

 

Opening Trade – Bear Call Spread

Expiration Month

Option Order

Strike Price

Symbol

Delta

Option Price

Contracts

Total

Mar Qty

Sell

$155

SPY

0.1865

0.4800

20

$960

Mar Qty

Buy

$160

SPY

0.0190

-0.0300

20

$(60)

Credit/Cash Received                                             .4500                       $900     

 

Opening Trade – Bull Put Spread

Expiration Month

Option Order

Strike Price

Symbol

Delta

Option Price

Contracts

Total

Mar Qty

Sell

$146

SPY

-0.2303

0.8950

20

$1,790

Mar Qty

Buy

$141

SPY

-0.1026

-0.4000

20

$(800)

Credit/Cash Received                                             .4950                       $990     

 

Why we recommend it:

As confirmed in the SPY ETF (SPY) daily chart below, the S&P 500 index blasted higher to start the year along with most of the other major equity indexes. After reaching a multiyear high last week traders immediately started cashing in profits and ended the S&P 500 index's string of seven consecutive weekly gains. Higher trading volatility has returned over the past week leading to triple-digit moves within the current trading range. Investors appear to be starting to get nervous aboutthe fallout from federal budget cuts mandated by the "sequestration" agreement and the rapidly approaching potential Federal government (partial) shutdown when the current appropriations bill ends in March – combined with March’s historically challenging trading environment. At the very least there is a high probability the SPY ETF will remain within the targeted trading range until the end of March as the price would need to approach its all-time high or crash to the beginning of the year lows to break outside of our range.

52-Week High: $153.28

52-Week Low: $127.14

Average Volume (3 month):   135,423,000

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Movers Trading Ideas ETFs

 

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