SPY Bull Put Spread Appears to be Overvalued at $0.46


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This SPY Credit Put Spread Can Net 30% in 9 Days

Bullish play with a target stock price of $424 or above

Strategy has +30% upside potential and 11% overvalued


Expiration15-Jun-23
Buy422 Put
Sell424 Put
Credit:$0.46


SPDR S&P 500 ETF Trust stock price has gained +1.4% today to $427.90. Based on moving averages, SPY has been in a uptrend since May 24, so this spread would be a great way to leverage a bullish outlook. Based on historical stock price behavior, this spread for SPY has a theoretical 84% success rate.

Option Profit Calculator for SPY Put Spread at 15-Jun-23 Expiration

If SPY stock price at expiration is at or above $424.00, this spread has a 30% upside potential

The optimal stock price for this option strategy is to close at or above $424.00 on the expiration date, June 15, 2023. In that scenario, both puts would expire worthless, allowing you to keep the entire $0.46 you received when selling the spread. That corresponds to a potential +30% return on the amount at risk with 9 days left until expiration.

The maximum gain will be realized if the stock price is at or above 424.00. The maximum gain is $0.46

The breakeven point is at 423.54, which is 1.0% below the current spot price.

The maximum loss will occur when the stock price is at or below 422. The max loss is $1.54.

SPY Spread Current Market Price vs. Historical Average

SPY Put Spread is trading at a 11% premium to historical average.

Using historical data to measure how a similar spread in SPY was priced in the market, the 4-year average value was 0.41, with a high mark of 0.68 and a low of 0.25.

Currently, this vertical put spread is bid at 0.46 and offered at 0.50. The midpoint of the spread is 0.48.

If we use 0.41 as our historical fair value benchmark, the current market bid price is at a 11% premium, while the current market midpoint represents a 16% premium.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
0.460.500.480.410.680.25
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The SPY put spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +30% upside potential, is 11% overpriced relative to historical measures, and will benefit from a stock price at or above $424.

See how Market Chameleon can help you make smarter and more efficient trades!


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NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated And may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices And were Not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.


The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.