HiPOS Weekly Update: Comfortably Out of the Money

By Derek Moore

Last week we discussed how you were rooting for more of the same. Well, good job! What you wanted came true. While the market oscillates in a small range around new all-time highs, the short put spread strike of 3550 is still comfortably about 19.5% out of the money.

That is a pretty decent amount and that is reflected in the positions showing nearly capturing all of the unrealized profit target. This also means that it is likely, barring some substantial unexpected move lower in the S&P 500 Index, that you likely won’t see much if any change as we march towards the expiration day of August 13th.

You can see on our typical graph above the distance remains elongated between the SPX level and the short put spread leg level. You also can see again how as time passes by, the purple defensive posture line continues to trend lower and to the right opening up additional breathing room between the index price and that curve.

We will keep this update short as in a positive way, I do not have much to add. You are rooting for the same old same old and for expiration to get here so we can be on to the next potential trade. Before we wrap though I will answer a question that has come up before when we were in this situation of having captured most of the unrealized profit target in advance of expiration.

Do you ever close out the position early? The quick response I always give is only if we can find something advantageous for you and your clients. While paying 5 or 10 cents to close out a position may seem immaterial, over time this would take away from realized profits on successful trades over time. Again though, if we do identify a good opportunity to roll early we will take that. Of course, we would update everyone via this blog.

Until next week, let's go SPX!