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Friday, July 18, 2014

SPY Ratio Spread (options)

6/24/2014

+5 July 2014 $195 puts at $1.54
-10 July 2014 $194 puts at $1.23

Net credit:  $0.92


7/18/2014 (exp)

buy (to close) 5 July $194 puts at $0.04 (to remove the risk)

NET PROFIT:  $421.24


Lessons:
  • on 6/24/2014, the July $194 put had a 38% probability of expiring ITM
  • early in the morning on 7/18/2014 (exp), the July $195 put was trading around $0.07; I decided to sacrifice the small gain for the possibility of making a little more money later that day (if SPY goes down to $194)

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