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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