Aggressive SPY Credit Spread Trade

Here is a special case where you may be able to place an aggressive credit spread trade and still have enough protection with a double resistance level.

The markets crashed the last 2 days of last week and we have another decrease today. Well on the SPY we have broken through two layers of support and we have tested the lower level today. Lets take a look at the chart (Click on it to see a larger view) -

Here we can see that the SPY dipped below the 112 support and the next day it dropped even further to break the support at 110. Today it attempted to get above the 110 line and failed to hold. Now tomorrow morning, we may see an attempt again at the 110 level, if it tests and then can not break through or can not hold above the 110 mark then it is time to place a trade.

This would be an aggressive Bear Call credit spread trade, selling the Feb 112 call and buying the Feb 113 call for a credit of .30 to .40. With only 25 days left till expiration. Even if the SPY breaks back up through 110 there is now strong resistance at the 112 level which it is not likely to break.

Other Posts on SPY Credit Spread

A Bear Call Spread in the SPDR S&P 500 ETF (SPY) | ONN.tv

SPY Credit Spread Trade Details: The SPY is currently trading at $110.01. Credit Spread/Bear Call Spread–. Sell the February 113 call (out-of-the-money) for $1.01 per contract. Buy the February 114 call (out-of-the-money) for $0.70 per …

Publish Date: 01/25/2010 13:30

http://www.onn.tv/

SPDR S&P 500 (SPY) Bear Call Spread: Trading the Broad Market | ONN.tv

This SPDR S&P 500 ETF (NYSE: SPY) call credit spread also offers a relatively high probability of success based on the expected movement of SPY until February expiration. The trade is certainly not without risk, but offers traders a …

Publish Date: 01/21/2010 10:30

http://www.onn.tv/

Disclaimer for High Probability Credit Spreads

I love trading high probability credit spreads. However there is one caveat that one should know about credit spreads. Although there is a high probability of a profitable trade there is always a chance to lose and in the case of high probability credit spreads the capital loss can be extensive. Now this video explains that; however what is not explained in the video is that trading credit spreads, as with any other trade it is not a set it and forget it trade you need to continue to monitor the trade and it is rare that if you follow the rules that you would have a total loss of a trade. as this video explains you need an Adjustment Plan. Well the easiest adjustment plan is that when the trade breaks your line of resistance or support the trade is broken and you need to get out of it and close the trade before maximum loss In some cases you can leave the bought part of the trade open to even regain some loss or even make it profitable again.

Credit Spread Options Adjustments

www.sjoptions.com Learn about the importance to adjustments with option trading. Credit Spreads can be especially dangerous if you do not have an adjustment plan.

Upcoming CBOE Seminar: Dan Sheridan

A couple people have confused me with Dan Sheridan, but alas I am not he. However you are not going to want to miss his expertise in trading options and if you live near Huntington Beach, California or like me close to Chicago you have an opportunity in the next couple of months to learn from him how to adjust your credit spread trades (another question I am frequently asked).

Check out the curriculum of the upcoming new for 2010 seminar –

Everything you ever wanted to know about options orders (Marty Kearney, Peter Lusk or Jim Bittman) Develop realistic expectations for how option prices change. Learn how to enter in option orders from former Market Makers.

THE COMPLETE PORTFOLIO – Dan Sheridan

Consistent Monthly Income Strategies in a Volatile Market.
Dan Sheridan shows how he finds and adjusts credit spreads, calendar spreads, condors, butterflies and double diagonals.

Speculative Strategies for your portfolio
Dan will explain how he used volatility skews in the trading pits to find the markets’ big movers. He will also demonstrate how straddles were traded in the pits and conclude by illustrating strategies he employed to trade a company’s earnings.

Live Trading
During live market action, Dan will show you how to put on his trading strategies while he is teaching.

The Art of Adjustments
Dan will demonstrate specific adjustments he used in the pits to fix trades that go against you.

The Chicago seminar is scheduled on March 4th – to register and learn more go to Real Trading with Dan Sheridan

I am not paid to endorse this seminar, it is just that good that I think you need to go and if you register before the end of the year it is $100 less!

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