I must’ve struck a nerve with someone over my article yesterday. I proposed that it would have been impossible to duplicate the results of the trade I shared yesterday, on the basis that I was able to take this Asymmetrical Put Butterfly Spread all the way to Expiration and have it Cash Settle for $9.93.

I shared that I felt it would have been impossible to enter a similar trade using SPY options and get out before the day was over. My premise was that the Market Makers would do what Market Makers do – Avoid Giving you Fair Value!


My critic did not doubt me on that premise. What he did say was what I didn’t say! He pointed out to me my strike price selection. He correctly reminded me that SPX options are roughly 10 times the size of SPY options.

My $5530 Put would have an equivalent SPY option with a strike price of say $553. My $5520 Put would have an equivalent SPY option with a strike price of say $552. But there is no $551.50 strike price SPY option to match up with my
$5515 Put.

The fact of the matter is that he pointed out to me, that I did not point out to you that SPX has twice as many strike prices as SPY. Therefore, a trader cannot trade SPY options with as much precision as they can trade SPX options.

I’ve been trying to make the point all along that traders should quit trading SPY options and instead trade the Cash Settling SPX & XSP options solely on the premise that a trader can hold SPX & XSP options to the end of the day and have their Intrinsic Value simply deposited in one’s account. While that is true, there’s more reasons still. Just as this one reader pointed out to me.

While I have your attention, I want to go over my position with you explaining just how this worked out so well to my benefit:
First off, this was a three-sided position. But I didn’t have to placed three separate orders to enter it. I placed a Limit Order which was filled at a Net Debit of $3.55. Doing so cost me a total of $355. That was all I paid and that’s all that was at Risk.

When SPX closed the day at $5520.07 only my $5530 Put (which I was Long) ended the day being In-the-Money (ITM). As such, I was credited the difference between my strike price and the Settlement Price (the Intrinsic Value).

The SPX $5520 Puts which I had sold Expired Worthless. They ended the day being Out-of-the-Money (OTM). But it was close. I made it by just seven cents.

Finally, my Lower Wing Option, SPX $5515 Put expired worthless as well. It ended the day being $5.07 Out-of-the-Money.

But understand if SPX had crashed and all of these options ended up In-the- Money (ITM), they all would have Cash Settled with money being placed into my account for both my $5530 Put and my $5515 Put. They would have taken money out of my account for the SPX $5520 Puts. But since everything works out to the penny, if SPX had crashed I would had still netted $5.00 in Cash.

This was a good trade! And this is a trade that couldn’t have been equaled by trading SPY options. Cash Settled Options are the way to go! I’ll have more reports sharing why as the days pass. Feel free to point out anything I miss. I very much appreciate constructive criticism.


Thanks and Good Trading,
Chris