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.
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.
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.
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.
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.