Trading Standard & Poor 500

Like every day from the year we got a lot of news with some implying a down move, other an up move and all this noise get’s me confused…could be down, could be up, could be neither. So, let’s make it simple and away with trade with this idea in mind. Yep, you’re right and an options trade is gonna follow:

340/343/310/307 Short Iron condor strategy in SPY(Standard & Poor 500 liquid ETF) with 52 days to go reflects perfectly what we talked about.

SPY probability move

We want to close the trade before we reach 21 days to expiration or at 50% of the total credit received. So, roughly until the end of February. As we can see from the above, the probability for the stock to trade above 340 or bellow 310 till the 26th of February is around 15%.

But let’s see the trade:

SPY options trade

We can see that we risk 2 to make 1 and if we close it as we implied above, we have a 78% probability of making money in this trade. I double tested it with a Monte Carlo simulation and looks like most of the simulations are delimited by the short strikes of our strategy.