Trade Idea #558
August 11, 2022
Trade Idea: SPY $419.99 (S&P500 ETF)
Buy August 29th $415 Puts $4.40
Sell August 19th $408 Puts $1.12

The S&P500 just made a 50% retracement from the 5.5 month high/low range in just 8 weeks.
And what a difference 8 weeks make when looking at the Open Interest board.
I went on the Open Interest Tool and clicked on every expiration for the rest of 2023 including Wednesday’s expiration. I then clicked “Chart.” The following graph pops up, which gives me a look at where the bodies (dead & alive) lie:


You can see the massive amounts of Puts per strike starting at the $330 level all the way up to the $400 level, where there is ~500,000 Puts. Even at the $410 Put you get close to 200k and another 100k at the $420 strike.
The market is like water. It follows the least resistance.
Puts are resistance on the way down.
They are a good part of the reason the market has gone up so fast.
Now, you can’t see on the chart, but there are about 20,000 Puts at each $5 intervals in the August 19th expiration between $410 and $425.
Jackson Hole
The next big known event is Jackson Hole on August 25-27th, after that expiration.
I want to make sure we have something on for that week. So, I was curious about the Open Interest after next week’s expiration and September 2nd. This is how it looks:

This looks much different that the first chart. You can see that there is very little going on until you get to the $400 level.
Again, this never means the “SPY WILL DROP.”
It only means that the “SPY COULD DROP QUICKLY.”
First, we need a “turn.” And bear markets make it very difficult to catch any/all turns. That is their nature.
The Trade
When I did the SPY $405 Put Spread a couple weeks ago, I mentioned the case for SPY $419-$420. We are here.
It’s incredibly important not to miss these Put entries that allow us to jump in with Calls. I missed a quick opening in April and it cost me.
Here’s the trade that makes sense with SPY $420:
Buy 1 August 29th $415 Puts $4.40
Sell 1 August 19th $408 Puts $1.12
Net Debit = $3.28
The Target Stock Price Range is $400-$405.
Futures are up overnight and there are economic numbers tomorrow that can push the SPY up further.
If SPY opens $422, then you can move the strikes to $417 and $410.
If SPY is $425 then $420 and $413 would be great. Move up the strikes to get that $3.25 range on price for a $7 spread.
Note: The SPY opened up near $423. We entered the $418-$411 at $3.25
***UPDATE: This trade idea went up 417%.
Trade Idea #558
August 11, 2022
Trade Idea: SPY $419.99 (S&P500 ETF)
Buy August 29th $415 Puts $4.40
Sell August 19th $408 Puts $1.12

The S&P500 just made a 50% retracement from the 5.5 month high/low range in just 8 weeks.
And what a difference 8 weeks make when looking at the Open Interest board.
I went on the Open Interest Tool and clicked on every expiration for the rest of 2023 including Wednesday’s expiration. I then clicked “Chart.”
The following graph pops up, which gives me a look at where the bodies (dead & alive) lie:


You can see the massive amounts of Puts per strike starting at the $330 level all the way up to the $400 level, where there is ~500,000 Puts. Even at the $410 Put you get close to 200k and another 100k at the $420 strike.
The market is like water. It follows the least resistance.
Puts are resistance on the way down.
They are a good part of the reason the market has gone up so fast.
Now, you can’t see on the chart, but there are about 20,000 Puts at each $5 intervals in the August 19th expiration between $410 and $425.
Jackson Hole
The next big known event is Jackson Hole on August 25-27th, after that expiration.
I want to make sure we have something on for that week. So, I was curious about the Open Interest after next week’s expiration and September 2nd. This is how it looks:

This looks much different that the first chart. You can see that there is very little going on until you get to the $400 level.
Again, this never means the “SPY WILL DROP.”
It only means that the “SPY COULD DROP QUICKLY.”
First, we need a “turn.” And bear markets make it very difficult to catch any/all turns. That is their nature.
The Trade
When I did the SPY $405 Put Spread a couple weeks ago, I mentioned the case for SPY $419-$420. We are here.
It’s incredibly important not to miss these Put entries that allow us to jump in with Calls. I missed a quick opening in April and it cost me.
Here’s the trade that makes sense with SPY $420:
Buy 1 August 29th $415 Puts $4.40
Sell 1 August 19th $408 Puts $1.12
Net Debit = $3.28
The Target Stock Price Range is $400-$405.
Futures are up overnight and there are economic numbers tomorrow that can push the SPY up further.
If SPY opens $422, then you can move the strikes to $417 and $410.
If SPY is $425 then $420 and $413 would be great. Move up the strikes to get that $3.25 range on price for a $7 spread.
Note: The SPY opened up near $423. We entered the $418-$411 at $3.25

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