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In today’s Webinar for Ally Invest ( previously Trade King), which we do every Monday at 11 am central, the trade today was a Back spread or Back ratio trade.

With SPX at $2472 , I bought 2 Sep 1 expiration  2535 calls and sold 1 Sep 1 Expiration 2510 calls for $1.80 Credit. I like these type of trades when SPX is near all time highs and VIX is 11 or under.

Live Trade

This was a Live trade. I executed this trade by doing a credit spread and then buying the extra call. I like to keep the position deltas near zero or a little long at the onset to combat the Volatility risk of this long Vega trade on the upside.

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My position Greeks right now  with SPX at 2473 are: Deltas  -5.46   Theta    .61      Vega  -3. This is an OTM Call back spread  that starts out short Vega but picks up quite a bit of long Vega on the upside from the extra long call.

Deltas

I would of rather started out position deltas near zero or a tinge long but this is OK for now. I hope to buy this spread in for a debit of around $1.00. This trade ties up about $2000 of capital in a Reg T account at most Brokerage houses.

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If I buy in this trade for $1.00 debit, that would be about a  4% yield. This is a 32 Day trade and I would get out of this by Aug 8 to avoid time decay risk on this trade, especially if SPX moves up toward my long strike.

 

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Dan Sheridan

dan@sheridanmentoring.com



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