Come on, Take the Money and Run…

We have made a tidy profit in a couple of our options positions, and the risk-reward analysis clearly skews to the risk side. With that in mind, when you receive this alert, sell to close the UUP June $24 calls (UP160617C00024000) and buy to close the SPY June $215 calls (SPY160617C00215000).

The dollar will probably continue to grind higher with prospects of another rate hike on the horizon. However, time is not in our favor and the option trades almost completely on intrinsic value. That situation means the price of the option basically is just the amount above its strike price. There is little volatility or time value priced in. Let’s sell this option, which last priced at 79 cents, for a 102% profit and look to reload on the dollar trade in the days ahead.

While our SPY option will probably expire worthless in June, we believe it is best to close out the trade with a 93% gain and not risk losing our profits over 11 cents. Put another way, the risk of losing our profits over the reward of another 11 cents does not seem to justify keeping the position. As we always say, trade when you can and not when you must.

Despite the range-bound action in the broad markets, the options markets are always on the move and we are looking at adding a couple more positions. Stay tuned!

Best,

Doug and Tom