Trade of the day: $SPY Short Put
Got to Risk it to get the Biscuit !!
This trade is a short SPY 640 put, expiring Jan 16 2026 (≈ 64 days to expiry), sold for about $ 8.80 credit.Smaller Accounts can use SPY, /ES or /MES
💡 Rationale & Benefits
Moderate IV environment: SPY’s IV at 21 % is higher than its 1-yr average (~17 %), offering fair premium for index sellers.
Strong support zone: 640 sits roughly 5 % below spot — a natural technical support level near the 50-day mean.
High probability income: ~ 77 % POP with limited time to expiry (2 months).
Synthetic discounted entry: Willing to own SPY at $ 631 basis (≈ -6 % from current price).
Scalable theta play: For portfolios needing steady cash flow, short index puts at -0.25 Δ fit perfectly within a systematic premium selling framework.
⚠️ Risks & Considerations
Market risk: A > 5 % sell-off would push SPY toward strike, causing rapid P/L erosion.
Volatility expansion: A jump in VIX adds temporary mark-to-market pressure.
Event risk: FOMC or earnings season macro moves can cause sharp drawdowns.
Assignment: If SPY < 640 at expiry, you may be assigned and own 100 shares at $ 640.
Undefined risk: No hard floor — use position sizing and/or a cheap protective leg (e.g. buy a 600 put for ~ $ 2 to convert to a bull put spread).
🧭 Management Guidelines
Profit Target: Buy to close if premium decays to ≈ $ 3 – $ 4 (≈ 50–65 % of max profit).
Defense: If SPY drops below 650 or VIX > 28, roll down/out to Mar or Apr 2026 expirations.
Conversion: If assigned, treat it as a discounted SPY entry ($ 631.20 basis) and write covered calls to reduce basis further.
📰 Newsletter Write-Up
🦾 Trade Idea: Selling the SPY 640 Put (Jan 16 2026) for $ 8.80 Credit
We’re taking advantage of elevated index volatility by selling the Jan 16 SPY 640 put for an $ 8.80 credit. With SPY around 675, this strike sits about 5 % below the market and carries a -0.26 delta — a comfortable balance between premium and probability.
If SPY stays above 640 through mid-January, we keep the entire $ 880 credit per contract. If it pulls back, we’re happy to own shares at an effective $ 631 basis, a healthy discount from today’s price. The trade offers ≈ 77 % probability of profit and positive theta of ~ $ 14/day.
Because this is an undefined-risk trade, we’ll size modestly and monitor VIX. If SPY drops below 650 or VIX spikes above 28, we’ll roll the position forward to extend duration and collect more credit. Alternatively, buying a 600 put defines risk and turns this into a bull put spread.
Bottom line: A measured, high-probability premium sale on the broad market that earns $ 880 for 64 days of exposure and positions us to buy the market 6 % lower if it dips.