I am not a financial professional and this is not financial advice.

1/26/24

This page will chronicle the evolution of my weekly SPY options trading strategy. The general idea is to wait until the S&P500 drops significantly from its high. Then purchase a Call option at or just below the previous high with an expiration date of 10 or so days out.

Assuming the world doesn’t end or we don’t fall into a true recession, the odds of winning this bet seem extremely good. The key is to set a profit goal and sell when you hit it. This has proven to be the most difficult part of this strategy. On the 16th of January, I bought a SPY $476 Call that was to expire ten days later. My goal was a 50% return and when it hit, I hesitated as SPY continued to soar. 

The next time I checked Robinhood, my contract was worth less but still above 50% profit so I sold. In the space of 5 hours, SPY had hit another new high that was significantly higher than when I sold. Had I held that contract until the end of the day, I would have seen a 300% profit. If I didn’t sell until today, the day it expired, that contract would have been worth over $1,200.

There are two takeaways from this:

1. The 10-day SPY Call was a solid choice that had 300% return. I only realized a 56% return, but that is still a win. More importantly I set a plan and stuck to it.
2. It might be worth buying two of each contract, one to sell when it hits the goal, and one to ride out until close to expiry. This seems like a great way to avoid leaving money on the table. 

In the case of the contract I sold today for a 21% profit, I simply needed to be more liquid given that is the weekend and the end of the month. When buying this contract, I failed to adhere to my strategy and bought something with an expiration just 8 days out. While the contract didn’t tank, it did lose and regain its value several times over the week. This prompted me to sell when I saw that SPY was failing to break its ceiling of $489. 

Two weeks of trading ended with a profit of $438 on a $371 initial investment. Going forward, I will reference the starting amount and the weekly or bi-weekly profit compared in an effort to validate what I believe to be a rock-solid trading strategy that is both brilliant and relatively straightforward. In fact, it wouldn’t surprise me if there was a whole community of regular dudes who traded on a similar strategy and are making bank. I fully intend on becoming one such dude.

-Sc.