TRADE UPDATE – 6 & 7

“Tomorrow we can drive around this town, and let the cops chase us around” – Gin Blossoms

We went to watch them celebrate their 25th anniversary of New Miserable Experience the other night.  They definitely look different (less hair), but I’m always impressed when any band can stay together that long and still sound great live.  Equally impressed when the lead singer plays the tambourine throughout most of the show.

There hasn’t been a whole lot of movement over the past few weeks in my trades as the volatility skew remains steep and theta has been held up until recently.   I did make a small adjustment to trade 7 to roll up the strikes which are now at 2545-2595-2635.

Trade 6 is currently up 1.2%.  Watching paint dry on that one.  Trade 7 post adjustment is doing much better and currently up 4.9%.  Here is the 7 day step view of both trades combined.

Due to the slow theta decay, I’ll be holding on to these a little longer than normal.  As you can see above, as long as we remain in this range between 2560-2610, the trades should remain profitable.

One thing that many people don’t know about trading SPX is the very favorable tax treatment.  Typically any gains on an investment held less than one year are taxed at your normal rate.  SPX index options get special Section 1256 treatment.  This means that 60% of the gain is treated as long term (at a 15% tax rate), and the other 40% as short term (at your regular tax rate) even if the position is held for less than a year.  One of a few reasons why a majority of my trading involves the SPX.