By Derek Moore
Today is expiration day for our primary HiPOS Conservative trade. The position will expire worthless at the close of the market today (Friday) which results in a full profit realized. As sellers of premium, we take in a credit and want the positions to eventually go to zero. That is what happened in this successful iteration.
We wanted to put out this quick update and usual graphic to help frame how, despite the market moving higher, the trade still worked. Since we were short a call spread, the market moving higher was not what you were rooting for. Yet, because it never got too close to our short strike, the danger never materialized.
This is a great example of the market running out of time to materially threaten the spread. HiPOS is all about the relationship between time, volatility, and price. It is also worth noting that despite the market moving higher, it never breached the purple curved line where ZEGA’s traders might adopt a more defensive posture.
So, with this one completed, stay tuned next week as the trading team is already at work running scenarios for a new entry.