Hi Semage, do you have software to help with this sort of...

Hi Semage, do you have software to help with this sort of analysis? I have used Hoadley extensively in the past. I see his OSET is still free for the basic version and, although it has some limitations, it's pretty good for looking at the passage of time, price and volatility. One thing I liked about it is that you can put your trade in and save it to the lower section. Then you can change volatility and it will overlay the comparison on the lower screen.

With only a 25 point spread, it could take a very large fall to see very much profit in the spread. If you posted more of your table, you could get some idea of how far the spread would need to be in the money to see how this spread might take to make money if volatility remained the same as now. I've found that a useful and quick guide while being aware that it's only a rough guide.

A bear put spread is normally vega positive which means it will still lose from a from falling IV as well as direction if the market goes up. However, the sold put provides some buffer with a fall in IV than if you had the long put alone.

If the market continues to go up, there are a couple of things you could look at. One is to roll the long put down and out to form a calendar spread. Then if the short put expires worthless, you have a long put further out which can be rolled up and into another bear put spread if you have a sell signal. Rolling up into a bear put spread from a single put requires buying a higher put and then selling the one you own plus another selling another one to complete the new bear spread. Sometimes this can be done for very little cost so it's a case of doing some homework at the time. But be careful that you don't end up running up huge brokerage and spread costs along the way!

Anyway, some thoughts and passing on some info I have gleaned along the way in my own learning curve. At least you have a defined risk spread and, as index options are cash settled at expiry, they don't have the traps of assignment found with stock ETOs.

BTW, yes lower put strikes often have a higher IV than those with a higher strike.

Here's the link to Peter Hoadley's OSET: http://www.hoadley.net/options/optionstools.htm