Initiating short position on SPY

Trade Thesis:

  • Today’s volatility forecast down (0.53%)
  • 295 strike put asking well below BSM valuation (underpriced)
  • Higher 1-week vol forecast would benefit long gamma trade (convexity)
  • New volume on SPY 295 strike following short-covering at opening bell

The trade will be closed in the event of:

  • an aggressive up-auction with failure to see rejection at ~ 3007-3017 (SPX) (high-water marks for IV & GARCH vol forecasts),
  • geopolitical/econ news that pushes price to new highs where it finds light selling,
  • I become convinced the market is undervalued at a top.