I believe that current market rally will continue for a while, however I’m pretty confident that there will be a pretty good correction at the end. Predicting when this will happen in the tough part. Monday I saw the opportunity to play it both ways. I bought SPY at 116.65, sold-to-open S117 calls expiring this Friday at .78, and for every call I sold bought three S114 puts expiring Friday at .27 for a net investment of 116.68.
If SPY continues its rally through this week to close above 117 , I will pocket a small $0.32 gain per share. If the market sags , but does not tank, my worst case loss is $2.68 per share at 114. If the market tanks my break even is 113.10 and provides $2 of profit per share for every point below that.
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