Re-entering the SPY Bear Call Trade with Wider Margin of Safety
In this post, I will discuss a re-entry of the same trade, but with a wider margin of safety. I sold a call option with a strike price of $498 and buying a call option with a strike price of $502 exp 16-feb-2024
Reasoning for the Wider Margin of Safety:
There are two main reasons for the wider margin of safety. First, the SPY has been trading in a very strong uptrend in recent months. Second, my proprietary indicator is signaling a potential reversal in the market (over 95 percentile).
Risk Management:
I am aware that I am entering a trade against the trend. Therefore, I will be monitoring the position closely and will be prepared to exit the trade if the market continue with a faster trend.
I have placed a stop loss order at 3 times the premium that I collected.
Conclusion:
I believe that this trade has a good chance of being profitable. However, I am aware of the risks involved and I am taking steps to manage those risks.
I will be updating this post with the results of the trade on the expiration date.
Reasoning for the Wider Margin of Safety:
There are two main reasons for the wider margin of safety. First, the SPY has been trading in a very strong uptrend in recent months. Second, my proprietary indicator is signaling a potential reversal in the market (over 95 percentile).
Risk Management:
I am aware that I am entering a trade against the trend. Therefore, I will be monitoring the position closely and will be prepared to exit the trade if the market continue with a faster trend.
I have placed a stop loss order at 3 times the premium that I collected.
Conclusion:
I believe that this trade has a good chance of being profitable. However, I am aware of the risks involved and I am taking steps to manage those risks.
I will be updating this post with the results of the trade on the expiration date.
