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Tuesday
Sep022014

SKOT Makes 49.40% in 7 Days Trading SPY Call Options

On 18th August, stocks were well off their highs and headlines were riddled with concerns about Europe and the Ukraine. We bought March 2015 calls on the S&P 500 ETF SPY, with a strike price of $215 for $0.83.

Just 7 days later the stock market had soared to new highs and we sold the calls at $1.24, banking a profit of 49.40%!

Through careful timing and analysis of both the fundamental and technical factors at play, we were able identify what we believed was a prime trading opportunity where the risk reward dynamics were strongly in our favour.

In our update sent to the subscribers of SK OptionTrader that week we said;

The improving economic situation is likely to support the bull market in stocks. We have been hesitant on taking a position in line with this view until now as the potential for a correction skewed the risk reward dynamics out of our favour. However, the recent strengthening in the technical situation means that we believe the correction has run its course.

The S&P has bounced from support near 1900 to close at 1955.06. This has lead MACD to make a sub-zero bullish crossover, which has historically preceded a rally and that we use as a major buy signal. Additionally, the RSI has risen above 50 to indicate strength overall in equities.

We now believe that the risk reward dynamics of taking a long position are favourable and will look to open at least one trade early this week

 …we are currently considering the $215 SPY Mar’ 15 calls.

These positions are intended to take advantage of a 50 point rally in the S&P, which we believe is likely. Such a rally would also be likely to lead to lower volatility in equities, so we will look to hold our short VIX trade with these positions as well.”

 Then, in a signal to subscribers on August 18th we signalled that we were opening the trade at the current market price of $0.83, explaining clearly what we were doing, the risks involved and how much capital we were allocating from our model portfolio to this trade.

“We hereby signal to buy SPY Mar 20 '15 $215 calls at $0.83 with 5% of our capital allocated to this trade.

To execute this trade we simply buy the $215 SPY March 2015 call options.

The max that can be lost on this trade is the net debit of $0.83”

We were just as clear signalling to exit the trade 7 days later, saying;

“We hereby signal to sell to close our SPY Mar 20 '15 $215 Calls at $1.24

To close this trade we simply sell the calls we bought at $0.83.

Having bought these calls for $0.83 we have banked a 49.4% profit on this trade.”

If one have invested just $1000 in trade the profit would have been $494, paying for a subscription to SK OptionTrader.

If you would like to receive our market updates and trading signals, please click one of the buttons to sign up below.

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Unlike many newsletters than may just make vague or subtle suggestions, which they claim credit for if they go well or deny should the trade not work out, we operate under a clear black and white system.

We say what we are trading, when we trade it and how much capital we allocate to the trade.

We publish every trade we make once it has closed and all winners and losers can be found on our website.

We also publish our portfolio return. Last year our model portfolio returned 92.28%. Feel free to read our full annual report here.

We have been in operation for over 5 years, with this being the 131st winning trade we have made out of a total of 146; meaning 89.72% of our trades have been winners.

This trade is similar to one we made earlier this year, details of which can be found here.

We made 20.44% in 19 days using SPY calls back in March, but this trade provided even greater returns.

At SK Options Trading we never trading simply for trading’s sake. Risking capital just to look busy or active is a ludicrous idea in our view. Patience is a key part of how we approach trading. We wait until the risk-reward dynamics are in our favour before making a trade.

We are comfortable taking aggressive positions if we have a strong view and we view the risk-reward dynamics as favourable. Indeed, this has contributed to our 895.42% return since inception.

We currently have 60% of our model portfolio invested, so if you wish to find out what trades we have on right now, sign up below.

Subscribe for 6 months - $499

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In addition to options we also trade ETFs and stocks on occasion, we have this flexibility to ensure we can execute our trading strategy with the optimal risk reward dynamics.

Our 5 year trading record speaks for itself, so we will end with a few key numbers:

Our model portfolio is up 895.42% since inception

92.28% return last year

An average return of 31.2% per trade

146 closed trades, 131 closed at a profit

Annualized return of 57.33%

$10,000 invested in our model portfolio at inception could have grown to $99,542.21

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