Which Side Are You On?

We’re near a tipping point currently in the markets. Taking a look at the chart of SPY, a triangle has formed over the last month and near its apex. Implied volatility on SPY has also been very quiet, trading in just its 17% percentile. I’ve structured 2 simple ways to play this breakout to either side using OptionsPlay. Which side are you on?

 

Bullish Breakout: look for a rally towards the $219.60 high’s within a few days. Buying Nov 4 215.5 Calls @ $3.05 would net a 66% return within 5 days.

 

I’m Bullish on SPY

 

Bearish Breakout: the downside could bring us back to the $212 support level. Buying Nov 4 215.5 Puts @ $2.75 would net a 75% return within 5 days.

 

I’m Bearish on SPY

 

In the case that SPY stays around its current price, we lose about 10% on each position in 5 days. Note that calls are trading at a higher implied vol then puts; 12.3% vs 10.7%. This makes the bullish bet the more expensive one.