The Smart SPX Trade
A few years back a pension fund in Latin America came to me with a problem.
They had a large amount of money that had to go to work, and when the number is that big there are really only two places to put it — the S&P 500 or the bond market. They wanted to be long, because a pension fund can’t be short, and because of how much money is being printed I happen to agree with them. But they wanted a margin of error. Something that didn’t punish them for being early.
There’s no such thing as safe. There is such a thing as a buffer, and building one is a design problem you can actually solve.
What came out of that conversation is a trade I’ve called the Smart SPX ever since. Some people call it the Double Long. One friend calls it the stupid stupid, because you end up long the market twice.
Thursday we’re building it from scratch, live, with chains on the screen. And we’re going to look at the one we’re carrying in Portfolio 1 right now, including the part of it that hasn’t worked yet.
This is a members-only live session with Tony Rihan and Tony Battista.
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How we get there
Start with the obvious answer, then break it. You want to be long the S&P. Buy a hundred shares. That’s a hundred deltas and it works fine — right up until the market goes against you, because there’s no margin of error anywhere in it. You’re just long, at whatever price you paid.
Then break the next obvious answer. Buy an at-the-money call instead. Now you have a stop built in, because the most you can lose is the debit. But you’re only long fifty deltas, not a hundred, and you paid a fat extrinsic for the privilege. One of my rules is death before debit, and an at-the-money call is a lot of debit.
So use the algebra. Sell an at-the-money put and buy an at-the-money call at the same strike, and you’ve built a hundred deltas without owning a share. That’s a synthetic long. Same exposure, different plumbing, and the plumbing is where the opportunity is.
Now finance it. Sell a call above your long call, which turns the call side into a vertical. We are not selling naked calls — that’s rule number one and it isn’t negotiable. Then let the short put pay for that vertical. Done properly the whole structure goes on for a credit, which means you’re long the market twice and the market paid you to do it.
The one we’re carrying right now
Portfolio 1 has had a Smart SPY on since August 18, expiring December 18. Long the 770 call, short the 800 call, short the 750 put.
The vertical cost $15.71. The put brought in $18.28. So the whole thing went on for a $2.57 credit — $257 in our pocket to be long the S&P twice, with the short put struck well under the market.
Fifteen days in, it’s up $248. Here’s the part worth an hour of your time: the call side has made nothing. SPY is at 765, still below our 770 long strike, so the vertical is actually down $35. Every dollar of that gain has come from the short put decaying.
That’s not a flaw. That’s the design. The second long is what pays you while the first long waits.
Managing it, both directions
When it rallies. The call vertical is thirty points wide, so its ceiling is $3,000. We don’t wait for the last dollar — we take the vertical off around ninety percent of max and stop paying for the privilege of being right. The short put also collapses fast in a rally, so we close that at about ninety percent too. Above 800 at expiration this particular one makes $3,257, and we won’t be there to see it, because we’ll have taken it off long before.
When it drops to the short strike. We roll the put down and out. Then we roll it again. Down and out to infinity, because sooner or later the S&P bounces, and when it does we take the trade off and get our money back. This is the piece people get wrong, and it’s the piece that decides whether the strategy works over a decade or blows up in a quarter.
The discipline that keeps it alive. While you’re rolling a put down and out, you do not put another Smart SPX on. You wait. When that put is back to breakeven you close it, and then you start again. Stacking a new one on top of a defending one is how a good trade turns into a bad year, and we’ll be blunt about that.
What else we’ll get into
Why SPX and when SPY instead. Contract size, tax treatment, and how the choice changes what account this belongs in.
Where to put the strikes. How far apart the vertical should be, and how far below the market the put wants to sit. The answer moves with volatility and we’ll price it live rather than hand you a number.
What it costs to hold. Margin against the short put versus what the same position would require in a cash account. Two very different figures, and we’ll show both.
Your questions, live. Bring a position. We’ll pull the chain up and work through it on screen.
The idea underneath it
Most people think about risk by asking how much they could lose. That’s a fine question and it’s not the interesting one. The interesting question is what you’re being paid to accept, and whether the payment is worth it.
The Smart SPX doesn’t remove risk. You’re short a put, and if the market falls far enough that’s real money. What it does is get you a hundred deltas of upside, a defined-risk call structure, a buffer below the market, and a credit on the way in. You gave up the upside above your short call to get it, and most of the time that’s a trade worth making.
Come and decide for yourself whether it is.
See you Thursday.
GYP: Members — here’s your invite
📅 Thursday, September 3, 2026
5:00 PM ET · 4:00 PM CT · 3:00 PM MT · 2:00 PM PT
The Smart SPX Trade
With Tony Rihan & Tony Battista · Live, with option chains on screen
