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HiPOS Conservative Trade Update: Premium on Both Sides

By Derek Moore

Today the ZEGA trading team re-entered the market in the S&P 500 Index after Friday’s successful expiration resulting in a full profit for the prior trade. With volatility remaining on the hide side, this iteration saw both a short call spread, and short put spread qualify at the same time for entry.

You can see above on our typical graph that the purple posture curve extends both above and below the market. This is because when we take in premium on each side it establishes a short iron condor position.  So, in this instance, you want the market to stay nicely between the strike prices. Fluctuation is fine, as long as the market doesn’t propel itself too much too soon towards those levels outlined by the dotted yellowish lines.

For this trade we are on the April 9th expiration, which is a P.M. afternoon version. With the market holiday on Good Friday, it marks 18 days until expiration.

Now for the Particulars:

  • Index: S&P 500 Index
  • Position type: Short Iron Condor Spread
  • Short call strike: 4275
  • Long call strike: 4325
  • Long put strike: 3175
  • Short put strike: 3225
  • Put Spread Risk (prob. ITM):  < 1% at time of entry
  • Targeted return: ~ 1.6%
  • Put Spread Distance OTM: ~ 18 at time of entry
  • Call Spread Distance OTM: ~ 8.5 at time of entry
  • Expiration: April 9th or 18 trading days to expiration