S&P short term cycle swings

[SyndicateTwo]

MRVLreader, this is the trade I'm thinking --


Let the TNA come in a little (fall) and try to get those July $10 calls as close to $5 to under $6 as possible. Then, I think we can sell the July $22.50 calls for around $1 or better. What happens?

You pay say, $6 for the $10s. Let's say we buy 40 for $600 each. That's $24,000

Our net basis then on the TNA is $16 between now and April. By then selling the $22.50s for a $1, we get paid that $100 per option which lowers our net cost on the $10s by $1, or down to $500 each. So, instead of paying $24,000, we only pay $20,000.

What happens? If the TNA is at $20 on expiration, those $5 calls are now worth $10. So, you double your money.

Or, at $22.50, the max level you can make, you're up $7.50 on them, or $30,000.

However, another way to play this is to buy the July $10s, then sell the April $20s. Then again, sell the Mays. right now there is now May contract. But they will add it in the next few weeks.


That way you collect month after month hopefully bringing down that $6 basis even more than $1.


'Roll' it.

This $24k investment could make you (and I) $50k by July.