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Pricing SPY Options Going Into The FOMC Meeting Looking For Big Moves

Jul. 31, 2013 11:31 AM ETSPY3 Comments
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cifikea's Blog
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Aloha my trading friends today we have the FOMC announcement as day traders these are the opportunities that we look forward to so we can use the volatility of this event to profit. So, what I want to look at is the SPY options . At the time of this post the SPY is trading at 169.00 pre-market . So now I want to do is look at the calls and puts . What we know is it the end of the day what they will be worth on expiration so the goal is to find a cheap price to enter at and to get pushed in the money so we will be examining a 1% and a 2% move in the SPY to see how this will affect the options that we will be looking at.

SPY last Trade @ 169.00 - 7:15amest

now, we got to keep in mind that these prices will change rapidly based on the SPY tape. But we are going to go off of yesterday's closing prices on the options and today's SPY pps as of time of post.

  • Bull Case Trade
  • SPY 169.50 CALL last trade @ .62
  • Break even @ 169.50 + .62 = 170.12 By Exp
  • 1% move in the SPY from current pps = 170.70
  • 170.70 - 169.50 = 1.20
  • .62 to 1.20 = 93% Gain
  • 2% move in the SPY from current pps = 172.40
  • 172.40 - 169.50 = 2.90
  • .62 to 2.90 = 367% Gain

  • Bear Case Trade
  • SPY 168 PUT last trade @ .58
  • Break even @ 168.00 - .58 = 167.42 By Exp
  • 1% move in SPY from current pps = 167.30
  • 168.00 - 167.30 = .70
  • .58 to .70 = 20% Gain
  • 2% move in SPY from current pps = 165.60
  • 168.00 - 165.60 = 2.40
  • .58 to 2.40 = 313% Gain

So as you can see with a 1% or 2% move in the SPY can make you some very large gains . Like I said earlier, be aware that these prices will change rapidly, and you may find cheaper entry. I just used these prices as a example

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SPY over the next 72 hours.

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