SPY (SPDR S&P 500 ETF) closed at $273.60 last Friday. It is a decision time as relates to the double calendar spread hypothetically initiated last week. The spread – short June 1 273 call/long June 8 273 call/short June 1 267 put/long June 8 267 put – cost $1.10 at the time. The idea was to capture theta out of the near-term options. It would be ideal if the underlying closed last week between $273 and $267.
Odds are SPY tries to rally at least early this week. There is room on the daily chart. That said, it continues to trade within a box.
Two of the four options expired last Friday, and the remaining two will do so this Friday. Theta decays at a steep rate for at-the-money options as the expiration data gets closer.
SPY June 8:
- Sell 273 call at $1.79
- Sell 267 put at $0.21
The June 1 short call ended up $0.60 in the money. With $1.10 spent at the time of the initiation, the whole thing can be closed for a profit of $0.30 – better than waiting until expiration and potentially risking $1.10.
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