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HiPOS Weekly Update: Final Week Upcoming

As we can see by our usual graph above, the market has cooperated quite well given we are short a call spread. While the market moved higher and even made a new all-time high this week, with the time to expiration waning, the value of the spread dropped in value (exactly what we want).

As of the close today, the S&P 500 Index sits about 5.3% out of the money below the short 3575 call strike price. As a reminder, we do not want the market to make a sharp out-sized move, especially early in the trade. The march higher from the S&P 500 Index was more orderly which kept it below our purple defensive posture line.

So, with only 6 trading days remaining until the August 28th expiration date, provided the market does not make any large moves higher, you most likely will not see much change in the value of the position until expiration. One question we sometimes get is why not close out positions early for a tiny amount of money given that any gains would be marginal.

The ZEGA team does review opportunities to roll to another trade early and/or close early.  The first question is, is there another trade available that meets the trading rules. On the latter, while you might see a spread marking at a very low level, this often is not representative of what it would cost to trade out or roll the position.

Finally, we did mention at the outset the possibility of selling a corresponding short put spread that would create an Iron Condor. Thus far that has not materialized. Given that we only have 6 trading days remaining, it is not likely that would be added. Of course, should conditions change, this is the place to look for updates.

So, we’ll end there and keep this update short. Hope everyone has a good weekend!