So I decided today to let my SPX position ride into the markets opening tomorrow morning. It’s a little close, and I’m watching carefully; although there isn’t anything that I can do if things go wrong

The futures look okay right now, and it looks as though the SPX is poised to open higher tomorrow morning – that bodes well for me. Plus, I’m sitting on a 6.81 point cushion before my profits begin to get whittled away, and another $0.65 before I start to lose money. My break even settlement price is $1254.35, of course I’m looking for the settlement to be above $1250.00.

Just for the sake of understanding/education… The SET, or SPX Settlement is the opening price of all the items in the index. Not every stock in the index opens at the same time, so by about noon eastern, the SET is calculated and contracts are settled using this value. Typically, the SPX opening value for the day and the SET are fairly closely correlated. For example, here is this weeks data:

You can see that for the most part the SET and SPX opening values remaining a few points apart. For the most part, this week the SET has been higher than the SPX, but that doesn’t really mean much It is important though, that you understand how these things work together. It’s your (my) hard earned money out there, and we don’t like to lose it! There have been times when the SPX opening and the SET are dramatically different, those days can hurt, a lot. That is why many people that I know close their positions on Thursday if the market is anywhere close to their inside strikes. My rule is that I close if I’m within 5 points, or if I’m not comfortable with the cushion. My 5 point rule is hard and fast, my comfortable rule is the gut check for each play. If you can’t sleep on it, you shouldn’t have it open!

We’ll see how things turn out, but I’m expecting to pull in a smooth 13% ROI for my May position. I’ll post an update tomorrow recapping the month of May and any June trades I put on.

Categories: Options Trading