HiPOS Weekly Update: Expiration Day Update

By Derek Moore

HiPOS Conservative Successfully Expires

With markets staying nicely well above the short 3350 put strike in our spread, today marks another successful realization of a full profit.

Markets only moved up since we initiated our initial trade and will wind up expiring roughly 23% out of the money. This is the distance between the market (S&P 500 Index) and the short 3350 put strike. What you’ll see over the weekend in accounts is a notation of “removed due to expiration” where the positions will go away.

As sellers of volatility, we want to take in premium and then eventually have it go to zero just like what happened.

The HiPOS Graph Review

The HiPOS strategy puts on trades that already have a high probability of expiring worthless.

What we wanted! Each day that passes, that probability changes based on how much time is left and where the market is. With markets moving higher, and time ticking by, the probability, which started out high, increased in our favor each day.

This is reflected in our purple curved line that dips down and to the right the closer we get to expiration.

Next Trade?

Implied volatility has reached lows not seen since back in 2021 when markets were marching towards previous all-time highs.

While HiPOS can sell short call spreads above the market, most of our trades are short put spreads. The reason being it’s easier for the put side to qualify under our strict rules for entry. Ideally, we’d see a little uptick in volatility coupled with more of a retracement in the market to provide a robust menu of options to consider.

ZEGA’s traders are already running the numbers and we’ll post an update when new positions are added.

With that we’ll wrap up this expiration Friday update and hope everyone has a nice weekend!