Warrior Trading Blog

$SPY Bounces Off Support for Options Traders

$SPY Bounces Off Support Midday

 

All the teaching and training we do for our studetns simply can’t replace seeing a textbook move higher off support in real time. Watching the $SPY move lower toward the 20EMA, before rejecting that area and the big pivot at $225. The daily chart below shows a clearer picture. See how the $SPY bounces off support and moves back toward the range highs? Now the question is, how do we capitalize on such a move?

 

$SPY Bounces off support

 

Well, as many may or may not know, the $SPY is one of the most liquid traded ETFs, especially as it applies to options. The first logical target at a reasonable price would be the current monthly expiration, since we would be anticipating a short term trade. The nearest strike price at the time was $226. The end result was me buying and alerting the Jan17 (monthly) $226 calls @ $1.01. Our target on them was to be the usual 30-50% ROI. Well, as you can see in the chart below, we timed this entry off support quite well. We got a near instant move higher and scaled out of the trade at $1.30 or +29% and then again at $1.43 or +42%. Remarkable move in just a short time. Turns out, the trade wasn’t over yet, and the $SPY continued moving higher without me! I sold the rest of my position at $1.43 and was very content with my fast winner. As I always say, you’ll never go broke paying yourself.

 

$SPY Bounces off Support options trade

 

If you have any questions about this trade or others, email me, [email protected]