HiPOS Weekly Update: In the Home Stretch to Expiration

HiPOS Conservative Position Update

After the close today, there are only 5 trading days left until expiration.

Midday on Friday we see the market sitting about 4% OTM (out-of-the-money) below the 5850 short call spread strike. The position currently is displaying an unrealized profit due to the time decay melting off combined with a lower probability of the S&P 500 Index (SPX) reaching the short strike within the remaining time to expiration.

This is an example thus far of a market moving against our short strike but showing an unrealized profit.

HiPOS has the potential to create profits in different market conditions.

Reviewing the HiPOS Graph

Above we see our typical graph which shows the chart of the SPX.

Notice how while price moved higher, it hasn’t gotten above the ZEGA risk curve, or the short strike line dotted in blue above the market. The risk curve represents an area should price move above, ZEGA’s traders may adopt a more conservative posture to further manage risk.

We are getting close to the July 19th expiration date noted on the graph as the vertical dotted red line.

What Are You Rooting For?

At this point, you just don’t want to see markets surge materially higher towards the short 5850 strike in the remaining days to expiration.

Almost all the time decay has been realized in the value of the short spread. Because of that, you shouldn’t expect the account value allocated to the HiPOS Conservative strategy to differ much until it potentially gets through to expiration and expires worthless. So, at this point, you want price to not aggressively move higher and time to tick by. We’ll of course be monitoring the positions and update all of you with any developments here on the website.

Let’s leave it there for this week.

As always reach out to a member of the ZEGA team with questions and you can always go over to our website to learn about the benefits and risks of HiPOS https://zegafinancial.com/products/hipos.