Hawking Portfolio Hedge for October 2016

With my September hedge Options expiring on Friday and Friday also being the ex-dividend date for SPY (S&P 500 ETF) I decided to open my hedge account for October on Thursday by buying 10 contracts of a $5 wide Put Spread at the 210/205 strikes:

This trade was placed at ~3:00 pm on Thursday in anticipation of a pullback on Friday to compensate for the dividend payout.

I also placed an order to sell 10 contracts of the 200/205 Vertical Put Spreads at $1 to cover the cost ($0.90) of the spread purchased and to leave me with a risk free hedge in the form of a butterfly spread. Although SPY moved down on Friday it did not move down far enough for the 200/205 spread order to get filled.

Update 1: 21 September, 2016

With today’s upward market reaction to the Fed comments my order to sell the 200/205 Put spread is not likely to get filled soon so I have placed a short term (2-day) trade in an attempt to pick up a few dollars to cover the cost of the above Put spread on a small pullback:

The position is a “Part 2” type diagonal Call spread at the 215/220 strikes with Sep 23 and Sep 28 expirations respectively. Maximum profit would be $1,250 with SPY closing at 215 on Friday.

Update 2: 23 September, 2016 13:51

An order to close out the above diagonal spread by buying back the spread for $1 has just been filled. This results in a net $250 profit to partially offset the cost of the original Put spread (top figure above).

Update 3: 7 October, 2016

With only 2 weeks to expiration on the Vertical Put spread hedge I have reduced my risk (and maximum potential return) by selling 10 contracts of the 209/202 Put Vertical also expiring on Oct 21 for $0.40 per contract (net $400 Credit). The P/L on the adjusted position now looks as follows:

My net cost of this month’s hedges is now down to $250.

I will update this post as more positions are added.

David