Some Big Waves This Week!

Heather Cullen

Heather Cullen

In The Money

ITM Update Trade the Tide not the waves

Some Big Waves This Week!

A new market high on Monday, then 2 very nasty down days on Tuesday and Wednesday. Thursday opened down – and then climbed. Friday continued the climb, to get back within 0.26% of where it opened on Monday although it had been down almost 2% at one point.

The tide seems intact, they were just big waves but when you are watching them happen you can get that awful sinking feeling. I have found that the best way to keep my sanity is to not watch it live! Tell yourself that you can check tomorrow after all the waves have died down and look at it with a clear head when everything is calmer.



I have been getting a lot of queries about LEAPS, which is rather awkward because the In The Money isn’t about LEAPS and doesn’t even mention LEAPs.

LEAPS (Long Term Equity Anticipation Securities) are options with expiration dates longer than one year and up to 3 years. They are not just for SPY, but for many stocks. However, they are not part of the ITM Strategy.

ITM goes out to 1 year, but no longer. The main criteria in option selection is that the option is deep in the money (DITM) enough that the effective price is less than 1% above the current price. For example, today SPY is trading at $443.36. 1% of this is $4.43 so we have an upper bound of $447.79. That means we look for an option where the strike + premium (the effective price) is less than $447.79.

If we look at what options we can buy today:

The shaded cells on the right are the ones where the effective price is within our bound of $447.79, so you would choose from these.

The expiry date that you choose depends on what strategy you are following. If it is the Lazy ITM, a ‘hands-off’ strategy where you only want to roll out once a year, then choose the Jun 2022. If you are following Turbo ITM, where you are planning to roll up when you get too DITM then feel free to choose the Jan or the March ones. Just remember to roll out 30 days before expiry, otherwise you will get exercised, and that is a bit of a hassle.

Not that it is the end of the world if you do get exercised. What happens is that that your broker will automatically exercise for you, and if you have enough funds in your account then you will be the proud owner of 100 SPY shares. If you don’t have enough funds (and you shouldn’t – having $44,336 sitting in cash is not part of the strategy!) then they will exercise and sell immediately, and the funds will land in your account.


How is the ITM Strategy going?

SPY is just off its all-time highs, but only by a little. Unless you started the ITM Strategy right on 16th August you will be in profit. At the time of writing the futures look positive and point to a jump up at open. There are several places you can find these figures. Here is a link to one that I use: 


In The Money Reviews

I get lots of lovely emails from readers, and I really like getting them. Thank you!  I would also really like it if you could tell Amazon in a review of the book. It would really keep my costs down and that’s always good. Here’s a link: Amazon: In The Money and scroll down until you see the Review This Product.


Happy Trading!

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