TheOptionPlayer.com used a limit order to execute a S&P 500 Index (SPXW) October 10th expiration (6-day) option strategy. Confirmation information is displayed directly below. Login in as a Premium Subscriber to view data/images
The difference between funds received and paid out is an approx. 40% profit if the S&P 500 Index settles above $2,870 at the close of trading on Wednesday October 10th.
Why we recommend it:
• We used a “limit” order to enter this trade and avoid market orders.
• The SPX index is cash settled and follows the European exercise rules where you cannot exercise early on any option positions. The options stop trading on the expiration day and settle the following morning.
• Trading cash-settled indexes will never result in the delivery of stock, as cash-settled indexes (as the name suggests) settle in cash. This means if both options expire ITM your account will automatically get credited with difference between the strike prices (e.g. $2,870 minus $2,865 = $5 per share). The maximum risk is the amount paid for the spread.
• After entering this trade we allow the position to expire at expiration. For this particular strategy there is no reason to adjust the trade or enter a closing order. Any gain or loss will automatically be cash settled in your brokerage account the day after expiration.
• As evidenced in the chart below, the 50-day MA is the firm support for the S&P 500 Index. You can see the index is consolidating in a trading range above that level.
• This is considered a high probability trade and all of the recent similar trades have been profitable.
• There is an extremely high probability the SPXW call options will settle ITM (in the money) on the October 10th expiration date.
52-Week High: $2940.91
52-Week Low: $2532.69