This morning I looked at several combinations of factors in the current market compared to past market data. I will provide a few close estimates here and give an idea for a profitable course of action.
There is about 40% chance of today's gap down filling today
There is about 60% chance of today closing above the open
Given today's gap down in SPY of about 1.6% I look at what happened if SPY closes down more than 1%
Scan Criteria
Yesterday closed down 2% or more
Today gapped down 1% or more
Today closed down 1% or more
When I ran this scan, I got 19 instances back in the past 23 years. All of them showed basically 100% loss of premium if selling an ATM put at the close with 5 days until expiration.
So the market on average rallied significantly, and with elevated volatility it was a good time to sell options versus buying options.
Trade Idea
If today closes down (especially if 1% or more), a bull put credit spread with ATM strikes could be written with an expiration of next Friday.
Also, cycles I use are suggesting upside into mid December or longer. And in the above scan, there was a very strong expected value by holding for 8-10 days from the close of the signal day
So a Dec 24th SPY expiration could be used as well for an ATM bull put credit spread
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