By Derek Moore
To quote a Steve Miller Band song “time keeps on slippin…into the future”, our conservative HiPOS short put spread is ticking along. As it does, the time value in the spread has come out to help propel the position to an unrealized profit.
By the way, that song incase anyone wants to go on Spotify is “Fly Like an Eagle”. I’m sure Rolling Stone would do a better job than me covering 70’s music, so for now we’ll just get back to our HiPOS trade.
After the close on Wednesday, there are only 11 trading days left until the July 9th expiration day. That does consider the July 4th market holiday during that time. While the passing of time has helped, so too has the position of the underlying S&P 500 Index price.
Also as of the close Wednesday, the short 3600 put strike is about 15% out of the money. As we normally point out on the graph above, as time passes by, the defensive posture line (outlined in purple) moves down and to the right.
This illustrates how the underlying index has more room to move without it causing a material problem for the price of our short spread. You also can see that while the price did dip lower, it quickly reengaged towards the old highs in the market.
So, what are you rooting for? More of the same really. The market can move around provided it does not move too far unexpectedly down from here prior to expiration. Since most of you are most likely long within other strategies, ideally the market keeps moving higher.
HiPOS is meant as a satellite strategy for no more than 10%-20% if deemed appropriate for a portfolio to begin with. It also is designed as a strategy that does not need the market to necessarily move higher to realized potential profits.
As we move towards expiration day, we will continue to provide updates over the next two weeks. Until then, enjoy whatever you may be listening or watching!