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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The Cherry Bomb
July 11, 2019

While the SPX hit an all-time high over 3,000 yesterday, it couldn’t quite close above that price.  In fact, its highest close was last week on July 3.  But yesterday’s performance was enough to get the talking heads gushing about the never-ending bull market.  On the other hand, yesterday’s volume in the SPY was only a bit higher than it’s been last week, suggesting that this particular market record could be standing on thin legs.  Even though the VIX is lower with the market up, at 13 it’s not quite as low as it has been on other big rallies.  So, maybe there’s a little more concern about a sell off than a record high might indicate.  With SPY’s IV rank at an even 15, debit spreads are the trade of choice.  If you’re a contrarian bear and think that SPY might sell off during the summer, the long put vertical that’s short the 298 put and long the 300 put in the August expiration with 43 DTE is a bearish strategy that has a 63% prob of making 50% of its max profit before expiry and that generates $.33 of positive theta.
 

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Tom Sosnoff
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