We are going to sell some SPY Volatility going into CPI tomorrow, with a butterfly options trade in the SPY options that expires Friday, October 21st (Next Friday). 

The VIX is currently trading at $33.49. We very well may get some volatility over the next week and a half, but the market is paying a premium right now and this is a nice risk vs. reward set up. We may not hold this trade through expiration, obviously depending on how the market moves.

All options expire Friday, October 21st. Be aware that the SPY also has options that expire on Mondays and Wednesdays. We are trading the normal monthly expiration on the 3rd Friday of the month, October 21st. 

Sell SPY $360 Call

Buy SPY $375 Call

Sell SPY $358 Put

Buy SPY $343 Put

This should result in a credit of about $10 (as shown below). Our max loss is about $5 per multi-leg contract ($500). Our max profit is about the $10 credit ($1,000) we collect when we initiate the trade. Our breakeven is about $348 on the downside and $370 on the upside.

We are basically selling a credit call spread above the current market, and selling a credit put spread below the market. When combined these form a butterfly 4-leg trade (It could technically be an Iron Condor but they are similar). We have no directional position and just want to see the SPY close near the current price next Friday.

We are creating a trade where we are risking $1 for every $2 of potential profit, and we don't lose money anywhere from about $348 to $370.

The SPY options expiring October 21st are pricing in about a $16 move in either direction, so that's exactly how far out we are going to go from the current price point. 

Our max profit area is at the $358-$360 range. The SPY is currently trading at $359.10 as of 2:30 pm ET.

We also get bank earnings kicking off the season this Friday. Stay tuned for updates!