New Income Trade in SPX

[Steven Place]

Going to put on some iron condors in SPX today. The VIX is at 15 and the realized vol on the SPX is still in the single digits.

We’ve got something like 16 full trading days left in December, and then just another few weeks after that going into Jan expiry. We’re seeing a little shake and bake in the markets right now but I think that it will continue to stay quiet into the end of the year.

Here’s the trade I like:

Buy SPX Jan 1870 Call

Sell SPX Jan 1860 Call

Credit 0.90

Buy Jan 1680 Put

Sell Jan 1690 Put

Credit: 1.20

Here’s what it looks like:

Now I’m not a huge fan of the upside risk here, so I want to go ahead and put a hedge on:

Buy 2 VXX Jan 45 Puts

A VXX Short actually adds to our short vega exposure (good) while working off some of our short deltas.

Here’s what it looks like in aggregate:

I plan to be out of this trade by the end of this month. Looking for 50% of max credit or more.

 

[Steven Place]

Didn’t have to do much in terms of adjustments this round.

We’ve got 1 month left, and the upside breakeven is way too close for comfort. I’m going to take gains here and use the capital for other trades.

No need to worry about the put side, just close out the call side.

Gains from the SPX trade are around 800 bucks, and the VXX puts are up about 110. Total take is 910, so about 15% return on max risk.

[Author]

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