HIPOS Weekly Update: Expiration Day on the Horizon

by | May 3, 2017 | Alternative Income, HiPOS (High Probability Options Strategy), Option Trading, S&P 500/SPX

With 9 days left until expiration day, the market currently sits 13% above the short put strike and well above our purple exit curve pictured above. With the close last Friday, the S&P 500 Index (our underlying) was within striking distance of its 2400 high. With our High Probability Options Strategy, your clients root for the underlying index to remain as far away from the purple exit curve and short strike as possible.

As we get closer to expiration day, the remaining time value in the premium continues to erode. Barring any large move in the markets, your clients should not see very much change in the value of the positions until the trade ideally expires worthless for a full profit or our traders close it either opportunistically or defensively.

One of the questions by an advisor this week involved comparing the HIPOS performance YTD to the S&P 500 Index. It’s a fair question yet an important point is remembering why your clients have an appropriate percentage allocated to the strategy. The goal is to provide potentially low-correlated returns to other investments in their asset allocation. In a perfect world, every strategy does well at the same time. Investing isn’t always perfect though so the idea is for different strategies to carry the day on the day that other strategies cannot.