With only 5 full trading days left until expiration Friday morning February 19th, the S&P 500 Index has continued its march higher. This is positive for the HiPOS Conservative trade in a few ways. First, the index has stayed well above the purple defensive posture curve. But it also has caused a positive reduction in the value of the spreads due to that market movement and time decay ticking off.
This trade is a good example of how the continued heightened volatility in the markets allowed ZEGA’s traders to get the requisite premium while also being very far out of the money at entry. The key going forward will be for the S&P to simply stay around where it is in the final week of the contract or move higher. Due to the gap between the current price and the short 3100 strike, currently around 20.5%, it has enough room where a minor to moderate move lower would not put the trade in jeopardy.
One question that came up this week involved whether we would find a complementary short call spread to add to the trade thus forming a short iron condor. The short answer is probably not. Given how little time is left and the fact that short call spreads are not able to be found usually with little time to expiry, it is likely this position is ridden through expiration.
As always, if some changes occur, we will post another update.
Within the HiPOS Aggressive complex, the ZEGA team has been actively working on the next positions. Expect another blog post about HiPOS Aggressive tomorrow with more information.