Credit Spread on the SPY

The SPX is one of my favorite indices to place credit spread trades, however the SPY is also available. The main reason is that the S&P 500 uses European style options so that if your sold option gets into the money your option will not have a chance of being exercised. Meaning you will have to pony up the cash to close the trade even if you do not want to yet if your sold option is exercised. In European options it is only allowed to be exercised at expiration, so this takes a little risk away and we certainly like to take risk away.

Today I want to point you in the direction of Pete Stolcers of www.1option.com. He has a blog on trading with exceptional explanations. He is currently using credit spreads and following the SPY for confirmation of trend. On Tuesday he was expecting a hold of support at 146 and he certainly called that one. I want to point out his strategy -

Sell out of the money call credit spreads on stocks that have been in a downtrend and have recently bounced with the market. Sell out of the money puts spreads on the strongest of stocks that did not depart from their uptrend during the recent market decline. If the market breaks above or below the dotted support/resistance lines drawn in the chart, buy in the losing spread positions and wait to see if there is any follow through. I don’t believe the market will break out of this wide range. Consequently, selling out of the money premium (while the option implied volatilities are high) is the strategy of choice.

Good strategy - here are the two posts one from Tuesday and the other from Thursday explaining further his view on the market and using credit spreads to profit from the current market situation.

Tuesday’s Stock Option Trading Strategy!
Thursday’s Stock Option Trading Strategy!

credit spread, option spreads, Pete Stolcers, SPY

Archer: Google credit spread

Brent Archer posted a bit about one of my favorite comedians, Jim Cramer, and his opinion on Google (GOOG). OK if you do not know who Jim Cramer is then you really have not been following the celebrities of the Markets; next you are going to be telling me you do not know who Lindsay Campbell is, which by the way she had some tips on GOOG as well today or should I say again ;). Jim has a show on CNBC and he is a wild and wacky trader. He did manage a hedge fund at one point in his career; however most people in the know say his wife is a better manager.

Whatever I am not in the know, Cramer brings his information to the masses and gets more everyday people involved in learning about proper investing and trading. He has opinions agree with them or disagree with them is up to you.

Brent Archer, however is one of my favorite traders, and his credit spread for today based off of information provided by Cramer is a December bull-put credit spread below the $610 range.
Check out the rest of the post here –> Cramer: Google to keep moving higher

My opinion I used to play Google when it was half the price of what it is today. It was scary back then and it is scary now; however if you have paid attention to the stock and have read it daily looking at the charts and getting a feel for the stock for at least a couple of months then I say go ahead and play it. GOOG does have a good support above the 610 level and right now it seems to be hitting its head on a resistance point at 700. But also realize that under the 610 level you are looking at a spread premium of around .25 to .30 for a $10 spread. Not a lot of %.

brent archer, credit spread, GOOG, google, jim cramer

Goldman Sachs Credit Spread

Found a new credit spread trader - Summer. New to me that is. She has offered up an opinion on Goldman Sachs –> Goldman Sachs (GS) NewsBite - Goldman Sachs to Invest in ISTC

Summer recommends a December bull-put credit spread below the $195 level on GS. It would have to fall 14.6% before you would have a losing trade. At this level you could probably get a 190/185 for around .40 which is an 8.7% gain for less than a month holding. Not a bad little trade. One thing to watch out for is that earnings are on December 18th the Tuesday before expiration…be careful. One of my rules is to not trade through an earnings on a stock…bad things can happen like dropping 14.6%!

credit spread, goldman sachs

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