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HiPOS Weekly Update: Never in Doubt?

Expiration Day for HiPOS Conservative

Baring a monumental single day move we’d expect our HiPOS Conservative short put spread to expire worthless on Friday at a full profit.

The S&P 500 Index (SPX) currently sits just over 21% above the short 3200 put strike price through midday Thursday. While this trade was never threatened, it’s important to remember that anytime we put on a short volatility position, we are putting on risk. We use internal calculations to estimate probabilities of success and have stringent rules for entry.

HiPOS is a long-term strategy using disciplined rules for trading that happens to use short term (normally 3-4 weeks) options to harvest premium.

Reviewing Our HiPOS Graph

Above we see how after entering the position, the market moved higher and continued well about the short strike price extending the distance out of the money (OTM).

As time decay kicked in, you see that purple curved line extend down and to the right further distancing itself from price. This provided even more breathing room for ZEGA’s traders. HIPOS is a strategy benefiting from and affected by price, time, and volatility of the underlying (SPX).

As an aside, the timing of expirations and subsequent new positions have been in our favor recently.

What’s Next for HiPOS Conservative Accounts?

Assuming a successful expiration, over the weekend accounts should see a “removal for expiration” notation on the positions as they expire at zero.

Once a new position qualifies for entry under ZEGA’s stringent rules, we’ll publish a new article with its details. While the VIX (Volatility Index) remains elevated above 20, it has come down quite a bit. Opportunities should continue to present themselves rather more rapidly than when the VIX creeps to much lower levels like in 2017.

Stay tuned and we’ll be back with an update soon!