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
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