Below are the charts of SPY & SPX from Tuesday, September 3 (they are set to the Mountain Time Zone). The Markets o
Below are the charts of SPY & SPX from Tuesday, September 3 (they are set to the Mountain Time Zone). The Markets opened after a 3 day weekend at 7:30 AM Mountain Time. They basically sold off for 6 hours 17 minutes. At which time they made a sharp turn around climbing for the last 13 minutes of the day.
SPY made a low of $549.51 before closing that day at $552.08. This Move from Low to High was 0.467% (less than half a percent). Meanwhile SPX made a low of $5504.33 before closing that day at $5528.93. This Move from Low to High was slightly less 0.446% (once again, just under half a percent).
Now let's look at screenshots of their Options for today. We're going to focus on the Calls to the left. I want you to imagine that you bought the Low of the Day and then held out as long as you possibly could.
We can't really compare Apples to Apples. That's because these are slightly different. But they're close enough that we can hypothetically compare a Red Apple to a Green Apple (when it comes to eating Apples, I prefer Yellow Apples).
Let's look at the SPY $547 Call. It made a low of $3.06. The Last Trade was $5.32. If a trader Bought the Low and Sold the Last they made 73.8% in less than 15 minutes. Wonderful!!!
Now let's look at the SPY $548 Call. It made a low of $1.84. The Last Trade was $4.29. If a trader Bought the Low and Sold the Last they more than doubled their money in less than 15 minutes. Their move was 233%. That's better than Wonderful!!!
Finally, let's look at the SPY $549 Call. It made a low of $1.00. The Last Trade was $3.15. If a trader Bought the Low and Sold the Last they more than tripled in less than 15 minutes. That's the "best" Wonderful of the bunch!!!
Now let's look at some SPX options. But instead of trying to find a strike price to line up with the SPY strike prices, let's look for trades with Lows taking place near $3.06, $1.84 & $1.00.
In our hypothetical trading, we're imagining buying our options at the Low of the Day. For SPY options also imagined Selling our options at the Last Trade of the Day. This is kind of imagining perfection.
But in our hypothetical trading, using SPX Options, we're not going to hypothetically Sell them as the Last (which would give us the best results possible), instead were going to take them all the way through the End of the Day. We can do so because SPX Options Cash Settle at Expiration. They do so for their Intrinsic Value.
When using SPX Options, we don't have to look at the Last Trade. We don't have to because they Cash Settle. Instead of looking at the Last, which ended up being higher and would give us even better results, we choose to Not Sell to Close.
Having said all that, we'll start with the SPX $5510 Call. It made a low of $3.20. It Cash Settled for $18.93. That's just under a sixfold move. The profit would be 491%. That's an even better still Wonderful. Now let's look at the SPX $5515 Call. It made a low of $1.80. That's just a little less than the SPY $548 Call. This Option Cash Settled for $13.93. That's more than a sevenfold move. The profit would be 673%. That's an even better still better still Wonderful!
Finally, let's look at the SPX $5520 Call. It made a low of $1.00. That's the exact same price as the SPY $549 Call. As such, this is probably the closest Apple to Apple comparison. If a trader bought both of these at their Low, they would have invested the same $100 per contract in each.
I would like the SPX $5520 Call to make massively more money than the SPY $459 Call. It did in fact make more. But only an extra 78% more.
But maybe the best part is that the SPX Trades would not have been Day-Trades. If a trader were able to buy the SPY Trades at the Low and then sell them at the end of the day, each of them would have been a Day-Trade!
Remember buying an SPX option and holding it through the expiration at the end of the day does not count as a Day-Trade. As such, traders with smaller accounts can trade more often and make more money and not break any rules.
Thanks and Good Trading,
Chris
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