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
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