HiPOS Trade Update: Ringing the Register Early

By Derek Moore

HiPOS Conservative Closes Out Early to Take Profits

Today we closed out the short put spread early.

Most of the profit was already made even though there were still 16 calendar days left until the June 28th expiration day. Usually, we simply let the contracts expire worthless to realize a full profit. Based on the time remaining and the remaining potential profit, it made sense to close it out early.

A good way to think about this is sometimes the remaining juice isn’t worth the squeeze.

There is also the potential to get another bite at the apple sooner.

Should the market retrace with a commensurate rise in volatility, a new trade can be put on to grab additional premium. With the inflation data and Fed Meeting coming up the potential for those conditions are there.

How Often Do You Close Out Trades to Take Profits Early?

It doesn’t tend to occur that often.

The timing must be right where a trade is put on and the market runs higher (or lower in the case of a short call spread). You’d also typically see a drop in implied volatility. Plus, a significant amount of time left combined with a very low remaining time premium.

While it’s not the norm, historically we’ve made this move before when the market presents the opportunity.

What Should We Expect Going Forward?

ZEGA’s traders are already running the numbers to find another trade that meets our strict rules for entry.

Keep an eye on the market and implied volatility levels since HiPOS is an opportunistic strategy. Once a new trade is put on, don’t worry we’ll be back here to explain the particulars as usual. If you want more information on the strategy or want to learn a little more about it, you can click the link below.

HiPOS information on ZEGA’s website: HiPOS Presentation April 2024