HiPOS Weekly Update: Bending but Not Breaking with Down Move

Where Does the HiPOS Conservative Trade Stand?

After today’s close, only 10 trading days remain on the short put spread position.

Despite the market’s continued slide, and volatility rising, positions aren’t marking too bad with only nominal unrealized losses showing at this time.  Helping our positions from marking worse is the fact that time decay is benefiting the positions, plus the VIX Index was already elevated around the time of entry. Remember, with HiPOS, you have the potential to still realize profits even if markets move against you.

Reviewing Our HiPOS Graph Above

While markets are continuing lower, the move hasn’t been too quick to cause concern yet. Currently the S&P 500 Index sits about 13.5% above the short 3100 put strike, this is the distance out of the money (OTM). You’ll notice that the index (SPX) also remains above our purple curved line. We referenced how as time passes; the underlying has more room to “breathe” and that is on full display. Even though price has dropped, it still has a buffer above that curved line. Time decay works for us as short volatility sellers.

What Are You Rooting For?

Ideally, the S&P 500 Index firms up and rallies a bit to create even more breathing room.

Even though markets have gone down, we still have a healthy gap between the closing price and the short 3100 put level. When you sell premium and volatility is elevated, it allows us to initiate trades that are further away from the beginning which is a huge benefit. As always time ticking by will help, our positions and any drop in volatility will also positively impact the value of the spread, we eventually want to erode to zero.

As always reach out to a member of the ZEGA team with any questions.