Disclaimer: This is not a recommendation to take a trade and is being provided for educational and informational purposes only. See the full disclaimer.
SPX took off on Tuesday morning and never looked back. I did, however, sell the 1930/1920 Jul2 14 put spread for .45 early Wednesday morning.
This week is a short week for the markets and, as a result, I’m going to be looking for a trade in the weekly options a little earlier than usual. I’d like to get filled on a weekly options trade either today or tomorrow morning. The trade that I’m looking at doesn’t strictly meet the rules of the Weekly Theta system and that makes it a higher risk trade. I will be managing risk in this position based on the open profit/loss rather than SPX price levels.
The video below gives a visual overview of the Weekly Theta trades I’m considering. One thing I neglected to mention in the video is that there is a good amount of economic data coming out this week. I don’t trade based on economic events, but it is good to be aware of when we might expect the market to move.
SPX closed around 1960 yesterday and is trading a few points higher as I write this a couple of hours before the market opens. I’m looking at Jul2 14 put vertical spreads with a short strike around 1900-1910. I don’t want to sell the 1900 or 1905 spread for less than a .45 credit and I don’t want to sell the 1910 for less than .50.
Risk and Targets:
At the time I place the trade, I will also put in a GTC order to buy back the vertical for 80% of the credit sold. For example, if the vertical is sold for .45 I will be putting in an order to buy it back for a .10 debit. Additionally, I’ll set an alert on the price of the vertical for 80% of the credit in heat (about $35 on a vertical that is sold for .45). Note I put an alert on the heat below the level where I expect to get out so I have time to anticipate an exit before it becomes a necessity. If the trade taxes 110% of the credit in heat and/or price closes below the 1930 level, it should be closed.