I did some more thinking about this last night and decided to check the historical odds of getting a 102 strike put hit from a $110 level...basically an $8 drop in 36 days as that is what my trade would be for the January puts.
Other factors include the fact that the price is already at the low end of the trend or linear regression channel, even using the price at a peak this happened once in June...very close anyway and in the steep drop earlier in the year. During the drops I would be putting my energy into calls spreads so puts would not make it to the table very often.
So, rather than go on about it here I will be placing some orders, one and maybe two, for either Dec EOM or January expiry.
Order placed for Dec EOM, 6 contracts meets my target for $1200 risk. I went as low as 13 cents or better as SPY is going to open up this morning, maybe 60 cents, which may depreciate the put options...15 cents was based on yesterday's close prices. So we'll see what happens this morning.
It would be nice to be able to sell naked puts and keep all of the premiums, I could go lower on the strike as well and still come out ahead. I know I take the risk of the trade really going against me but it is an ETF tied to the S&P 500, that in itself creates a ton of diversity. The only downside is an ETF valued at $110 needs to have $11,000 free cash to back it up.
Jeff.
Questrade, My direct access discount broker.
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