TheOptionPlayer.com sets up a S&P 500 Index ETF (NYSE: SPY) short-term (38-day) option strategy (based on Tuesday’s closing quoted bid/ask mean)
Investors could simultaneously:
The difference between funds received and paid out is a $.59 per share credit which we keep if the S&P 500 Index ETF closes below $242 and above $227 on May 19th, but immediately execute a trade adjustment if it appears the price is moving outside of these boundaries. . If the price gaps higher or lower at the start of trading we will revise the strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
As evidenced in the chart below, the S&P 500 Index ETF (SPY) has been confined to a trading range since the middle of February. Current relatively high volatility levels and elevated gold and Treasury bond prices indicate money managers are nervous about equity valuations. Investors are still waiting on a huge tax cut from a healthcare reform bill or revised tax laws. Until the Trump administration and Congress can prove to the market they will deliver, investors will probably continue to maintain low equity levels. Especially considering that April is considered the last of what is historically considered the best consecutive six months for market performance. Plus the Fed has signaled intent to reduce the assets on their balance sheet which might further reduce available liquidity.
Unless there is some unexpected domestic or global economic event that might shock the major indexes out of their current range-bound trading environment, it is reasonable to expect the SPY ETF won’t be above our short call or below the short put on the May 19th option expiration date.
52-Week High: $239.78
52-Week Low: $199.60
The information presented here is for educational and informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful.