Credit Spread Trade Update with the SPX at 1,427

First, I need to do a little house keeping in follow-up to yesterday's post. At least one person was unable to follow the link, so I posted an alternative in the comments section but it was truncated. The full link is:

http://www.theoptionclub.com/quantum_swing_trader.php

Now, back to our trade.

Things looked good about this time yesterday, but as the day wore on stocks began to deliver mixed. Investors were tentative in advance of the Federal Open Market Committee's two-day meeting on the economy and interest rates.

The Nasdaq managed to climb 0.2%, the DJIA closed up less than 0.1%, and small caps advanced 0.4%. The S&P 500 lost some ground, down 0.1%. Volume was a mixed mixed picture, closing higher on the NYSE and lower on the NASDAQ.

We now have 16 days until our SPX options expire. We are too close to expiration for a call spread, so we will just need to be content holding our put spread.

Our short put option has a delta of about .08, which translates into an approximately 92% probability of the contract expiring out-of-the-money. The SPX is up about 6 points right now, so we'll just leave it alone and go about our day.

In a comment to a prior post, I was asked to expand up the greeks and why vertical spreads do not see big gains from favorable directional moves. I'll expand on that in my next post...

Good trading!

Christopher Smith
TheOptionClub.com