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E-mini Swing Trade Updated

|Includes: CME, SPDR S&P 500 Trust ETF (SPY), SPY

The Swing Trade

Here is another update for those of you following my swing trade on the E-mini’s. I am keeping a log of updates so we can all better understand the price behavior of my hedging tactic.

Last time I updated, the E-mini S&P 500’s (Symbol /ES) contract was at 893.25 and our call option we sold against it was at 52.00. At that time, we were running a $112.50 loss. Our hedge with SPX butterfly spreads with June expiration was running a $15 gain as well. We were net loss of $97.50. For memory purposes, our entry price on the E-mini’s was 898.25.

Now let me update you on where the trade is now after the favorable move to the upside. Our /ES futures position is up $987.50 while our /ES 870 covered call option is out $450.00. This brings our net gain so far on that alone at $537.50. Our SPX butterfly hedges are now down $70.00 in total. Again, our target ranges on those butterfly spreads were:

  • SPX between 790-820
  • SPX between 830-870
  • SPX between 945-955

Factoring in the $70.00 loss we are carrying in our SPX hedges we currently have an open position of profit of $467.50. If the SPX continues upwards slowly going into options expiration, we may get lucky and close at 950 which is a key resistance level for whole number traders. At that point we’d yield about another $475 in profit on expiration.

Summing it all up, as we become more right our profit and loss is growing and our hedges are working against us. However, we don’t mind because our break-even point is 843.50 (explained how it was calculated in this blog post). As we get closer to expiration, I will explain more about how extrinsic value works for us.

Disclosure: Long INTC, Long Faz, Net Long E-mini's S&P500, Net Short SPX