Options expiration was this week, and I had a short market position (from a December trade) to roll over. This resulted in me selling a call spread on SSO, which consists of 2 short January ’12 call options at $50 and 2 long January ’12 call options at $60.
SSO is a levered ETF that moves in the same diretion of market performance. Therefore, SSO will appreciate by 2% for every 1% advance by the market. By selling call options, I am betting the market will fall.
The resulting payouts for this trade are roughly as follows: if the market stays flat or declines by any amount, I will make about $800; if the market appreciates by 10% or more, I will lose about $1,200. The payout for the market appreciating up to 10% will be a prorated amount.
Top Five is updated to reflect this trade.
