Option Spread Combination Analysis 02/14/2024

 Our Option Spread Combination going into the day was:

Long Bull Call Spread
Buy Open Feb 14 '24 495 Call @ $1.13
Sell Open Feb 14 '24 496 Call @ $0.75

Cost = $1.13 - $0.75 = $0.38

Long Bear Put Spread

Buy Open Feb 14 '24 493 Put @ $0.99

Sell Open Feb 14 ' 24 492 Put @ $0.71

Cost = $0.99 - $0.71 = $0.28

Total Cost = $0.38 + $0.28 = $0.66

The late afternoon rally from Tuesday, during a decidedly bearish day, continued at the open this morning, with SPY gapping up to 497.30, and continued higher to 497.99 by 10:30.

By this time our initial sell target of $0.85 for the Long Bull Call Spread was reached, and that spread was closed out.

We can see on the Delta Price chart that after that initial run-up, SPY underwent a pullback back near breakeven just after noon.

The 15 Minute Chart continuing to look bullish during the pullback, with RSI(5) dipping below 50 with a bullish MACD.

We were able to close out the Long Bear Put Spread @ $0.10.

Our profit for the day was $0.85 + $0.10 = $0.95 -$0.66 = $0.29.

Our Option Spread Combination for Thursday is:

Long Bull Call Spread

Buy Open Feb 15 '24 499 Call @ $1.39

Sell Open Feb 15 '24 500Call @ $0.88

Cost = $1.39 - $0.88 = $0.51

Long Bear Put Spread

Buy Open Feb 15 '24 498 Put @ $0.80

Sell Open Feb 15 '24 497 Put @ $0.53

Cost = $0.80 - $0.53 = $0.27

Total Cost = $0.51 + $0.27 = $0.78

Today's Market Update

5WaveModel

Option Spread Combination Analysis 02/08/2024

 After a run-up yesterday to near the 500 level, SPY spent most of Wednesday afternoon trading in a narrow range between 497 and just under 500. Today saw a continuation of that trading range, as SPY opened flat, and quickly ran back up to 498.35. SPY then traded slightly down into midday, falling to 497.26. The afternoon was spent trying to make it back to the 498.50 level, which it did just before the end of trading before falling back and closing at 498.32.

The Delta Price chart illustrates just how narrow the trading was today, with SPY trading within a half a point either side of unchanged.

Our Option Spread Combination for today was:

Thursday's Spread Combination:

Long Bull Call Spread

Buy Open Feb 08 '24 499 Call @ $0.78

Sell Open Feb 08 '24 500Call @ $0.44

Cost = $0.78 - $0.44 = $0.34

Long Bear Put Spread

Buy Open Feb 08 '24 497 Put @ $0.64

Sell Open Feb 08 '24 496 Put @ $0.37

Cost = $0.64 - $0.37 = $0.27

Total Cost = $0.34 + $0.27 = $0.61

On the 15 Minute Chart we can see the opening downside bias, with the SPY RSI(5) falling below 30 at 11:15 with the MACD momentum at a low. with SPY also trading at the low end of the trading range, it was a good sell area. The Put Spread was closed out at $0.30

SPY then traded with an upward bias, with the RSI(5) and MACD momentum both increasing. However, the upward bias did not amount to much, and 3:15 the RSI(5) rose above 70, and the Call Spread was closed out at $0.10.

Today we closed out our Spreads for a total of $0.30 + $0.10 = $0.40. Our cost basis was $0.61, and today we had a loss of $0.21.

Friday's Spread Combination:

Long Bull Call Spread

Buy Open Feb 09 '24 499 Call @ $0.86

Sell Open Feb 09 '24 500 Call @ $0.50

Cost = $0.86 - $0.50 = $0.36

Long Bear Put Spread

Buy Open Feb 09 '24 498 Put @ $0.96

Sell Open Feb 09 '24 497 Put @ $0.59

Cost = $0.96 - $0.59 = $0.37

Total Cost = $0.36 + $0.37 = $0.73

Option Spread Combination Analysis 02/07/2024

 It was a decidedly bullish day for the market, as SPY made a run at 500. The day started with a large opening gap to the upside, taking SPY to 496.44. This was followed by a small move down to 495.40 where SPY once again moved higher, running up to 498.04. SPY then settled into a narrow trading range between about 497 on the downside and 498.53 on the upside, just shy of that 500 level. That narrow range held throughout the afternoon, with SPY closing at 498.10.

The initial move higher carried SPY right to the top of our +/-2 point target range, and quickly rose well above it. 

Wednesday's Spread Combination was:

Long Bull Call Spread

Buy Open Feb 07 '24 495 Call @ $0.52

Sell Open Feb 07 '24 496 Call @ $0.27

Cost = $0.52 - $0.27 = $0.25

Long Bear Put Spread

Buy Open Feb 07 '24 493 Put @ $0.93

Sell Open Feb 07 '24 492 Put @ $0.58

Cost = $0.93 - $0.58 = $0.35

Total Cost = $0.25 + $0.35 = $0.60

We can see that the Long Bull Call Spread ran up quickly, and by 11:00 had reached our $0.85 sell price.

The Put Spread never became profitable after that, so our profit for today was $0.85 - $0.60 = $0.25.

Thursday's Spread Combination:

Long Bull Call Spread

Buy Open Feb 08 '24 499 Call @ $0.78

Sell Open Feb 08 '24 500Call @ $0.44

Cost = $0.78 - $0.44 = $0.34

Long Bear Put Spread

Buy Open Feb 08 '24 497 Put @ $0.64

Sell Open Feb 08 '24 496 Put @ $0.37

Cost = $0.64 - $0.37 = $0.27

Total Cost = $0.34 + $0.27 = $0.61

I set an initial sell order for each side at $0.85

I then monitor the 15 minute chart for technical sell signals.

Option Spread Combination Analysis 02/06/2024

 The market opened on a positive not Tuesday, with a small opening gap higher to 493.50 leading to an initial rally up to 494.32. That rally quickly faded, and by 10:00am SPY had closed that opening gap, and continued lower to 492.05. A couple of rally attempts into the 493.50 area were quickly followed by a retreat back to the 492 level. SPY found itself once again around that level after 2:00. A last rally finally broke through that 493.50 level, and SPY ran back up to 494.04 before closing at 493.98.

The Delta Price chart shows SPY traded in a narrow range, never breaking above or below the +/-2 Point range.

Our trades are based on SPY exceeding that range, but trades can still be profitable when it trades within a tighter zone.

Our set-up for today was:

Long Bull Call Spread 

Buy Open Feb 06 '24 493 Call @ $0.94

Sell Open Feb 06'24 494 Call @ $0.57

Cost = $0.94 - $0.57 = $0.37

Long Bear Put Spread 

Buy Open Feb 06 '24 492 Put @ $0.86

Sell Open Feb 06 '24 491 Put @ $0.51

Cost = $0.86 - $0.51 = $0.35

Total Cost = $0.37 + $0.35 = $0.72

On the 15 Minute Chart, we see that SPY was coming off an overbought level on the RSI(5) which occurred at 3:00 on Monday. The MACD momentum indicator we use also showed it was coming off a high and working lower. The initial rally did not take the RSI(5) into overbought territory, but it did bring the MACD momentum right up to it's moving average, but failed to move above it. This indicated a short term high.

Our Long Bull Call Spread was closed out at $0.60.

SPY turned lower at that point, with the MACD momentum moving into oversold territory around 10:15. Our Long Bear Put Spread was trading above $0.30, and with our Bull Spread already closed out presented us with an opportunity for a profitable trade, and so the Bear Spread was closed out at $0.30.

Our profit for the day was $0.60 + $0.30 - $0.72 = $0.18.

Wednesday's Spread Combination:

Long Bull Call Spread

Buy Open Feb 07 '24 495 Call @ $0.52

Sell Open Feb 07 '24 496 Call @ $0.27

Cost = $0.52 - $0.27 = $0.25

Long Bear Put Spread

Buy Open Feb 07 '24 493 Put @ $0.93

Sell Open Feb 07 '24 492 Put @ $0.58

Cost = $0.93 - $0.58 = $0.35

Total Cost = $0.25 + $0.35 = $0.60

Option Spread Combination Analysis 02/05/2024

 An opening gap to the downside greeted the market this Monday morning, with SPY falling to 492.88 in the opening minutes. A rally attempt to close the gap failed, and the drop continued until 10:45 with SPY finding a low at 490.23. Another rally attempt started off that low and lasted until nearly 3:00 when SPY found itself at 494.17. This nearly closed the opening gap, but that was not to be as SPY drifted lower in the final hour, closing at 492.55

The Delta Price chart shows the initial fall, with SPY down more than a point, and then falling to a loss of nearly 4 points, more than our +/-2 point target range. SPY then recovered to near breakeven before falling back to a loss of just under 2 points.

Our Spread Combination was:

Long Bull Call Spread

Buy Open Feb 05 '24 495 Call @ 0.99

Sell Open Feb 05 '24 496 Call @ 0.61

Cost = $0.38

Long Bear Put Spread

Buy Open Feb 05 '24 494 Put @ 1.23

Sell Open Feb 05 '24 493 Put @ 0.83

Cost = $0.40

Total Cost = $0.38 + $0.40 = $0.78

When SPY fell to a nearly 4 point loss, we see our Long Bear Put Spread was trading well above the $0.85 initial target where it was closed out.

As SPY recovered, the RSI(5) reached an overbought condition above 70 around 12:45, and the Long Bull Call Spread was closed out for a nominal $0.05

 

Our profit for the day was $0.85 + $0.05 - $0.78 = $0.12.

Tuesday's Spread Combination:

Long Bull Call Spread 

Buy Open Feb 06 '24 493 Call @ $0.94

Sell Open Feb 06'24 494 Call @ $0.57

Cost = $0.94 - $0.57 = $0.37

Long Bear Put Spread 

Buy Open Feb 06 '24 492 Put @ $0.86

Sell Open Feb 06 '24 491 Put @ $0.51

Cost = $0.86 - $0.51 = $0.35

Total Cost = $0.37 + $0.35 = $0.72

Option Spread Combination Analysis 02/02/2024

 The rally that began Thursday after Wednesday's disappointing FED meeting continued today, with SPY gapping back up over the 490 level to 490.12. SPY just about closed that gap in the next few minutes, and then it was off to the races. SPY ran up to 490.95 just after 9:45, and then traded in an upward range over the next hour. Another leg higher took SPY to 492.45 just after 10:45. A slight dip to 491.64 was followed by another rally, taking SPY to 494.66 just after 12:30. From there, the first significant pullback occurred, which lasted all of ten minutes. After dropping to 492.25, the bulls took SPY higher once again, lifting it over 496 to 496.05 just after 3:00. The last hour saw some price erosion, with SPY closing at 494.35.

The Delta Price chart shows SPY trading above our +/-2 point range, and shows little opportunity to close the Long Bear Put Spread.

Our set-up for today was:

Friday's Set-Up:

Long Bull Call Spread

Buy Open SPY Feb 02 '24 490 Call @ $1.42

Sell Open SPY Feb 02 '24 491 Call @ $1.02

Cost = $0.42

Long Bear Put Spread

Buy Open SPY Feb 02 '24 488 Put @ $1.21

Sell Open SPY Feb 02 '24 487 Put @ $0.88

Cost = $0.33

Total Cost = $0.42 + $0.33 = $0.75

The SPY 15 Minute Chart confirms our suspicions concerning a lack of opportunity to close out of our Put Spread. We can see both the RSI(5) and MACD rising throughout the morning.  

Around 12:00 we can see a negative crossover in RSI(5) momentum, and the same on MACD around 12:15. We set an initial target for each side of the spread at 0.85. Generally the spread will not trade beyond the  0.80 - 0.85 range until later in the afternoon when the time decay kicks in, so holding on above 0.85 becomes overly risky.

We can see that the Long Bull Call Spread was trading above 0.85 before the technical sell signals were given.

By that time our Long Bear Put Spread was essentially worthless, with no real opportunity to get out after that.

Today's profit came entirely from the Long Bull Call Spread, which was closed at 0.85. Our profit today was 0.85 - 0.75 = 0.10.

SPY closed the day at 494.35, giving us the following set-up for Monday:

Long Bull Call Spread

Buy Open Feb 05 '24 495 Call @ 0.99

Sell Open Feb 05 '24 496 Call @ 0.61

Cost = $0.38

Long Bear Put Spread

Buy Open Feb 05 '24 494 Put @ 1.23

Sell Open Feb 05 '24 493 Put @ 0.83

Cost = $0.40

Total Cost = $0.38 + $0.40 = $0.78

Combined Spread Analysis 02/01/2024

 Following yesterday's sell-off, SPY opened to the upside this morning, gapping at the open to 484.60 from the previous close of 482.88. SPY reached 485.75 before dipping to 484.26. The buying continued through the first hour of trading with SPY rising to 486.21 before coming under selling pressure. Just after 11:00 SPY dropped to 483.80 before the buying continued. Just before 1:00 SPY had 488.24, and after a small pullback SPY rose steadily through the afternoon, closing just off it's high at 489.20.

Looking at our Delta Price chart, SPY spent most of the above our +/-2 point target range:

Our spreads from yesterday were as follows:

Our Set Up for Thursday:

Long Bull Call Spread

Buy Open Feb 1 '24 484 Call     1.44   1.45

Sell Open Feb 1 '24 485 Call      1.02   1.03

Cost = 0.43

Long Bear Put Spread

Buy Open  Feb 1 '24 482 Put      1.08   1.09

Sell Open Feb 1 '24 481 Put        0.77   0.78

Cost = 0.32

Total Cost = 0.75

On the 15 Minute Chart Spy was coming off a low on the MACD, and an oversold condition on the RSI(5). The initial move higher did not move the RSI(5) into overbought territory, and the MACD was positive. The pullback just after 11:00 brought the RSI(5) back near 30, and the MACD was setting up a higher low, which indicated a continued move up. This was a good opportunity to close out the Long Bear Spread, and as we see the spread was trading around 0.20 at the time.

As SPY continued to rally into the 1:00 hour, it took the RSI(5) above 70 and into overbought territory. While the MACD looked like it still had some room to run, our Long Bull Spread was reaching the 0.85 level which is usually a good area to close it out. We had already closed the Bear Spread for 0.20, so that would give us a decent profit.

After closing both spreads our profit was (0.20 + 0.85) - 0.75 = 0.30.

Friday's Set-Up:

Long Bull Call Spread

Buy Open SPY Feb 02 '24 490 Call @ $1.42

Sell Open SPY Feb 02 '24 491 Call @ $1.02

Cost = $0.42

Long Bear Put Spread

Buy Open SPY Feb 02 '24 488 Put @ $1.21

Sell Open SPY Feb 02 '24 487 Put @ $0.88

Cost = $0.33

Total Cost = $0.42 + $0.33 = $0.75

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