I don’t know if the inverted yield curve has any predictive powers, but as bonds keep rising, it seems like the market is thinking the economy could start slowing down any day now. But if the inversion signals recession, when will the SPY get the hint and drop? Sure, the SPY has been choppy this week, but it’s still up 11.8% for the year. It made most of that in Jan and Feb, though, while March is ending with a sub-1% rally. So, it does seem that the market could be getting tired and need a sell- off to recuperate. SPY’s 22% IV rank would suggest debit spreads might be the trade to consider. That’s why if you’re bearish, the long put vertical that’s short the 279 put and long the 281 put in the May expiration with 50 DTE is a bearish strategy that has a 61% prob of making 50% of its max profit before expiry and that generates $.25 of positive daily theta.
Opened 19/03/28 for $.77 debit
Closed 19/04/01 for $.38 credit