SPY Bear Call Spread at $1.24 Seems to be Above Fair Value


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This SPY Credit Call Spread Aims for 70% ROI in 11 Days

Bearish play with a target stock price of $586 or below

Strategy has +70% upside potential and 8% overvalued


Expiration08-Nov-24
Buy589 Call
Sell586 Call
Credit:$1.24


SPDR S&P 500 ETF Trust has increased by +0.1% today to $578.62. Based on moving averages, SPY has been in a uptrend since September 10, but the current price is still in an ideal range for this spread. Based on historical stock price behavior, this spread for SPY has a theoretical 64% success rate.

Option Profit Calculator for SPY Call Spread at 08-Nov-24 Expiration

If SPY stock price at expiration is at or below $586.00, this spread has a 70% upside potential

The optimal stock price for this option strategy is to close at or below $586.00 on the expiration date, November 8, 2024. In that scenario, both calls would expire worthless, allowing you to keep the entire $1.24 you received when selling the spread. That corresponds to a potential +70% return on the amount at risk with 11 days left until expiration.

The maximum gain will be realized if the stock price is at or below 586.00. The maximum gain is $1.24

The breakeven point is at 587.24, which is 1.5% above the current spot price.

The maximum loss will occur when the stock price is at or above 589. The max loss is $1.76.

SPY Spread Current Market Price vs. Historical Average

SPY Call Spread is trading at a 8% 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 1.15, with a high mark of 1.48 and a low of 0.82.

Currently, this vertical call spread is bid at 1.24 and offered at 1.30. The midpoint of the spread is 1.27.

If we use 1.15 as our historical fair value benchmark, the current market bid price is at a 8% premium, while the current market midpoint represents a 11% premium.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
1.241.301.271.151.480.82
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The SPY call spread we've identified here can be a good way to play a bearish outlook because the option strategy has a +70% upside potential, is 8% overpriced relative to historical measures, and will benefit from a stock price at or below $586.

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.


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