The 1500% Trade!

This week I’m going to walk you through how I was able to buy SPX Calendar spreads on March 2nd for $2.75 each and sell them on March 14th for prices ranging from $7.00 to $45.00! That means the worst performing Calendar had a 154% return. The best performer was up over 1500%. In.Eleven.Days.

Below are the actual tweets from the Vega Options private twitter feed. On March 2nd I notified the subscribers what option strategy I was considering for a potential move lower in SPX.

As you could see in the above tweets I also referred to the same strategy in the SPY because some traders prefer the smaller size and tighter bid/ask spreads in the SPY. Below is a better view of what the risk profile looked like when I was considering the trade.

As I began to get filled on the position on March 2nd I tweeted that to the subscribers.

On March 3rd I added size to the position.

On March 5th I discussed at what SPX price I would be willing to add even more size to the position. I started out with a small position on March 2nd and three days later it was a full-size position.

By March 6th the position had a 100% return on risk but I explained why I wasn’t selling a portion to reduce risk. The position structure was such that SPX price could see a huge swing higher or lower and I’d still retain a good profit.

As SPX continued sharply lower in price I began rolling the position down to increase the profitability at lower strikes. By collecting a profit for those transactions I was actually reducing the average cost of the position as well as moving the center of profitability lower.

After eleven days in the position, Friday March 13th was payday! I started exiting the Calendar spreads in the morning and was completely out of the position by noon. When all was said and done, I had originally taken on $3,300 of risk and closed the position with a profit of over $24,000.

Now, full disclosure, I would not have been able to book profits like that unless the VIX (implied volatility of SPX) has risen dramatically last week. Normally the strategy I employed would offer superior reward/risk but not that superior! Still, strategy does make a huge difference in potential profitability and it was because of the strategy that I did not feel compelled to exit the position even on days where SPX was up 4-5%. Staying with a trade can make the difference between profit and loss.

That is all I have for you now. If you are not a subscriber and you would like access to the Vega Options private Twitter feed, you can sign up for a 14 day Free Trial to try out the service. What have you got to lose, it’s free!

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Paul Frey is a 30+ year trader with experience in equities, options, and futures. In addition to trading he manages Vega Options providing option educational services to new and experienced traders who are looking for improved results. He teaches strategies and techniques that reduce or even eliminate the initial cost of a trade while still maintaining potential future profits.

15th Mar 2020

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