Risk checking for spreads

In light of my small boffo yesterday I thought I might take a closer look as a sheet that I had setup a while back to try to determine risk and ideal spread strikes.

It involved using various Average True Range (ATR) periods with a weighting towards the more recent values to come up with a daily ATR value. This value is then just multiplied by the days to expiry for the potential trade to come up with a possible range to give me a target to look for.

I put in an adjustment for position from the current median value of the 80 day Linear Regression. This indicates a call spread strike higher when the price is near the top of the channel and a put strike lower when it is near the bottom.

The last item is a risk factor that widens the spread strikes depending on which spread (Call or Put) I am looking at based on the LR position again. Values are 1, 2 and 3. Call or Put spreads with the SPY price at the median use a 2, general risk. I might use these for an iron condor under certain circumstances. Call spreads with the price at the top of the channel get a 1 and at the bottom of the channel get a 3. Puts are reversed.

Puts are skewed farther with a built in factor as they are higher risk spreads in general.

Based on these numbers from today's chart I get a call strike to sell at 116.38. I would round up or down depending upon market conditions, it's only one dollar either way so it's not a big deal. The put comes up to 108.23.

Using my target pricing I get a decent call spread at 117-118...which was where I was trying to go yesterday around noon and goofed with another 116-118.

Where I was going with this was to look at the ATR for past 10 trading day periods to get a feel for what might happen over the next 10 days to the expiration of my spreads. I am almost $3 away now and the ATR for hte past 10 days is 1.09. Tha largest 10 day ATR I see in the past was around the $3 mark as SPY was coming off of the March lows... it has been higher but those were due to large drawdowns earlier than that...ATR for uptrends are more relevant right now as ATR peaks on down moves with a few exceptions.

Jeff.