SPY Monthly Chart

SPY Butterfly Trade Idea

Yesterday’s high volume correction helps me enjoy trading, but today’s low volume bounce is like sitting in a French cafe on a cloudy day watching people pass.

I’ve been looking at two possibilities:

  • One, we bounce of the 50 day moving average and continue our slow crawl skywards
  • Two, we get a CPI/PPI shock Thursday and Friday.

Lets take the second, what kind of spread on the $SPY could I put in place for OPEX next week? I’m going to propose a 131/134/137 April butterfly. The IV has fallen off of yesterday’s peaks and I find, ‘the day after’ is usually the better day to enter this kind of trade. You’re giving the market a chance to follow through, or not.

If the CPI/PPI numbers are good you’ll probably lose on this trade, on the other hand if they’re neutral or bad, you’ve got resistance in the right places and only 5 days until expiration.

The S&P chart looks like this:

SPY Monthly Chart

The risk profile looks like this:

SPY Risk Profile

Good Trading.