SPY junk call spread 05-21-2014

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SPY junk call spread 05-21-2014

Postby DeltaSkelta » Wed May 21, 2014 4:24 pm

I decided to incorporate a new strategy into my trading as of today which is selling junk.

I really want to be able to sell naked options as junk but I cannot currently get approved for trading options at that level which is terrible. Instead I have to sell some wider spreads which just doubles my commissions and cuts my profit in half.

I sold a 195/198 call spread in SPY for $.19 which puts my max profit at .19 and my max loss at 2.81

I really feel uncomfortable with this trade after it filled because I collected way too little credit in my opinion. I remain bearish on the overall market and I do not think that SPY has what it takes to rally that high. It had about a 10% chance of finishing in the money at the time that I sold it.
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SPY 195 junk spread 05-21-2014.png
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Wed Jun 18, 2014 4:05 pm

So its almost a month later now and I have taken some serious heat on this spread. It is now at the highest that it has ever been and SPY has a dividend coming up as well so I am at risk to have it exercised.

That was a whole lot of trouble to go through to collect a crappy $.19 on the spread. What a bad experience for my first time selling junk way out of the money.
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SPY junk spread 06-18-2014 update.png
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Tue Jun 24, 2014 9:39 am

I have an order to roll this to JUL for $.25 credit which coincidentally brings it to $.19 after commissions which is exactly what I collected for it in the first place. I will get more aggressive with rolling it sometime later this week if this doesn't hit today.
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SPY junk roll 06-24-2014.png
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Tue Jun 24, 2014 10:05 am

The order just hit. Looks like I've taken in $.19 and $.25 which brings the total credit to $.44 before commissions. What a stupid trade. Won't be making another one like this again anytime soon.
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Tue Jun 24, 2014 5:51 pm

Literally right after I made this roll, SPY crashed and is now below the short strike. If I would have just waited a little bit, I would probably not have had to roll.

Oh well there was no way of knowing that.
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Tue Jul 15, 2014 9:04 am

I could have rolled this the other day for more credit, but I was greedy and thought SPY was crashing and would be below my short strike soon.

It went back up and then came back down today so I decided to roll for even when I had the chance. I only had three days left on this trade, and now I have added another three weeks. My expiration is now the second week of august.

I wasn't able to take in any more credit and I incurred some more commissions, but oh well.
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Re: SPY junk call spread 05-21-2014

Postby DeltaSkelta » Thu Aug 21, 2014 6:49 pm

FINALLY. I am out off this trade and I am relieved.

After all the rolling and extra credits, or even credits, I ended up buying back the short put a day or two before expiration when it was less than .05 so it was commission free. I then let the long leg expire OTM worhtless because I wasn't able to sell it anyway.

I think this trade has taught me a lot about rolling and staying in a trade. I will look through it more in depth at a later time, but it feels good to finally be out and be profitable from it.
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SPY post trade 8-22-2014.png
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