The BECS Thesis:
SPX is rarely above 15% above its 50-Week MA, and when it is, it doesn’t stay there for very long. Currently, it is 15.9% above that MA and has been as high as 16.7% above it at the recent ATH. The rubber band is pretty stretched, and should pull back at some point, even if it’s done by trading sideways while the MA catches up.
With SPX’s 50-Week MA having risen 43 points over the last month, I am projecting that that MA will be approximately 3261 in 4 weeks (it is 3218 now). Multiplying 3261 by 1.15 equals 3750. Padding that by a little for mom and the kids gets me up to 3800 for the short strike of a BECS.
SPX Jan 29th (29 days)
STO 3800 / 3850 BECS for 18.25 (1 contract)
Capital Allocated: $5000
Potential Max Profit: $1825
Planned max loss: $1000
Upside breakeven is at about 3820 on the SPX, and my loss at that point (based on T-0) will be about $1000. If SPX reaches that point, I will roll up and double, based on my bearish thesis above.