Products
Platforms
Accounts
Inspiration
About
Support
Institutional
Log in Open account
Switzerland
CFDs and forex spot transactions are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor lose money when trading CFDs and/or forex spot with this provider. 0.42% of retail clients trading in leveraged products experience a negative account balance after a stop out occurred.
Show more
CFDs and forex spot transactions are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor lose money when trading CFDs and/or forex spot with this provider. 0.42% of retail clients trading in leveraged products experience a negative account balance after a stop out occurred. You should consider whether you understand how CFDs, forex spot transactions or any of our other products work and whether you can afford to take high risk of losing your money.
Show less
What are my options - SPX

What are my options - SPX

Equities
Koen Hoorelbeke

Investment and Options Strategist

Summary:  The upcoming CPI-numbers can impact the overall market, so you might consider a trade-setup on an underlying with a broad reach, like the S&P 500 Index. This article discusses possible trade setups using options on the S&P 500 Index.

What are my options - SPX

The Consumer Price Index (CPI) is a critical economic indicator that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The upcoming CPI announcement on Wednesday can lead to significant market movements, affecting the prices of stocks, bonds, commodities, and their derivatives.

As the CPI-numbers can impact the overall market, you might consider a trade on an underlying with a broad reach, like the S&P 500 Index. The S&P 500 Index is identified by the SPX-ticker.

Options on the SPX are an alternative to options on the SPY. Unlike the SPX, the SPY is an ETF, and approx. 10 times smaller than the SPX. There are however more differences why some traders and investors prefer the SPX:

- Cash Settlement: SPX options are cash-settled, meaning you won't end up with a large position in the underlying securities when the options expire. This can be beneficial if you want to avoid the potential complications of physical settlement. In some countries you avoid extra taxes in case of assignment.
- Size: Each SPX option contract represents 100 times the index level. For example, if SPX is at 4,000, each contract represents $400,000 in value. This makes SPX options more efficient for larger accounts.
- European-style Exercise: SPX options can only be exercised at expiration, which eliminates the risk of early assignment that you might face when trading American-style options like SPY.

Below are some strategies you can use to act upon the upcoming news-events.

Please note that the strategies and examples provided in this article are intended for educational purposes only. They are designed to aid in the development of a thought process and should not be blindly copied or implemented. Every investor or trader must conduct their own due diligence and consider their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market involves risk, and it's crucial to make informed decisions.

Strategy: Vertical Credit Put Spread (Bullish)

The Vertical Put Spread is a defined risk strategy, meaning that your risk (and profit) is defined upfront. This is achieved by selling a put option at a certain strike price, and simultaneously buying another put option at a lower strike price as insurance. The goal is to profit from a rise in the stock's price, or a price-decline that doesn't go under the short put of the vertical spread.
This setup involves a Bull Put Vertical Spread strategy on the S&P 500 Index. The index last traded at 4398.95 USD.

The option strategy consists of two parts:

- Selling to Open a Put option for expiry date 18-Aug-23 at a strike price of 4250 USD
- Buying to Open a Put option for expiry date 18-Aug-23 at a strike price of 4240 USD

This is a credit spread as the premium received from the short put is greater than the premium paid for the long put, resulting in a net premium received of 120 USD. The margin impact for this trade is 804.83 EUR with no trade fees listed. The maximum risk for this trade is -880 USD, with a maximum profit of 120 USD.

The breakeven point for this trade is 4248.8 USD. The trade has a probability of profit at expiration of 79.31% based on the delta's of the short-position.

A Bull Put Spread is a bullish strategy that profits from a rise in the underlying asset's price or a fall in the implied volatility. It provides a defined risk trade with the maximum loss being the difference between the strikes minus the net credit received.

As with any strategy, there are always risks involved:

Price Risk: If the S&P 500 index falls below the breakeven point of 4248.8 at expiration, the trade will result in a loss.

Gap Risk: The index could gap downwards to a level significantly below the strike price of the long put, leading to losses sooner than expected. The maximum loss for this trade is 880 USD.

Early Assignment Risk: There is no risk of early assignment with SPX options as they can only be exercised at expiration and always cash-settled (meaning no delivery of underlyings).

Strategy: Iron Condor (Neutral)

The Iron Condor is a defined risk strategy that seeks to profit from a lack of movement in the underlying asset's price. This is achieved by simultaneously setting up a Bull Put Spread (selling a put and buying a lower strike put) and a Bear Call Spread (selling a call and buying a higher strike call). The goal is to have the underlying asset's price stay within the range of the two spreads by expiration. Profits are limited to the net premium received for setting up the trade, and the maximum risk is the difference between the strikes of either spread, minus the net premium received.
The option strategy consists of four parts:

- Buying to Open a Put option for expiry date 18-Aug-23 at a strike price of 4560 USD.
- Selling to Open a Put option for expiry date 18-Aug-23 at a strike price of 4555 USD.
- Selling to Open a Put option for expiry date 18-Aug-23 at a strike price of 4240 USD.
- Buying to Open a Put option for expiry date 18-Aug-23 at a strike price of 4235 USD.

This strategy profits if the S&P 500 stays between the two inner strikes, which in this case are 4240 and 4555, by expiration.

The net premium received for this trade is 180 USD, the margin impact for this trade is 79.86 EUR. The maximum risk for this trade is -320 USD, with a maximum profit of 180 USD.

The breakeven points for this trade are 4238.2 and 4556.8. The trade has a probability of profit of 63.10% based on the delta's of the short-positions.

As with any strategy, there are always risks involved:

Price Risk: If the S&P 500 index moves significantly and goes beyond the breakeven points of 4238.2 or 4556.8 at expiration, the trade will result in a loss. The maximum loss for this trade is 320 USD, at expiration.

Early Assignment Risk: There is no risk of early assignment with SPX options as they can only be exercised at expiration and always cash-settled (meaning no delivery of underlyings).

Strategy: Vertical Credit Call Spread (Bearish)


The Vertical Credit Call Spread, also called a Bear Call Spread, is a defined risk strategy that aims to profit from a decrease in the stock's price, or a price increase that doesn't surpass the short call of the vertical spread. This is achieved by selling a call option at a certain strike price, and simultaneously buying another call option at a higher strike price to limit potential losses. The maximum profit is the net premium received for setting up the trade, while the maximum risk is the difference between the strike prices minus the net premium received.
The option strategy consists of two parts:

Buying to Open a Call option for expiry date 18-Aug-23 at a strike price of 4545 USD.
Selling to Open a Call option for expiry date 18-Aug-23 at a strike price of 4535 USD.

This is a credit spread as the premium received from the short call is greater than the premium paid for the long call, resulting in a net premium received of 265 USD. The margin impact for this trade is 653.29 EUR. The maximum risk for this trade is -735 USD, with a maximum profit of 265 USD.

The breakeven point for this trade is 4537.65 USD. The trade has a probability of profit of 74.88%, based on the delta of the short position.

A Bear Call Spread is a bearish strategy that profits from a fall in the underlying asset's price or a fall in the implied volatility. It provides a defined risk trade with the maximum loss being the difference between the strikes minus the net credit received.

Risks involved with this trade:

Price Risk: If the S&P 500 index increases beyond the breakeven point of 4537.65 at expiration, the trade will result in a loss. The maximum loss for this trade is 735 USD

Early Assignment Risk: There is no risk of early assignment with SPX options as they can only be exercised at expiration and always cash-settled (meaning no delivery of underlyings).

The strategies explained above are short volatility/limited reward strategies intended to take advantage of a higher theoretical probability of profit. There are of course a lot of other strategies possible. For example: if expecting a significant directional move, you can consider owning a long put or long call strategy, or a long put spread or long call spread. In a future article I'll explain the differences between the short and long strategies in general.
Options Overview by barchart.com

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
    Read full article
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

    Read full article
  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland
Products & pricing
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you consult our Risk Warning before you start trading and you understand the risks.

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.