Hey trader,
Rolling a put hedge is the decision I’ve got in front of me today. The Fed announces tomorrow, my downside coverage is already sitting on the market, and I didn’t pay a dime for it.
Back on September 9, I walked you through the institutional hedging signal I’d been reading and the structure I put on behind it. I sold call spreads for $5.41 and bought puts with the money.
Those call spreads came back to 12 cents. I closed them out, which leaves the put underneath free and clear.
SPY sits at 757 right now. My strike is 757, with about three and a half days left on it.
That put hasn’t done a thing for me yet.
It isn’t in the money. Until 757 breaks, it sits there doing nothing at all.
That changes the moment it breaks. So what do I do with it before the announcement?
Nothing today. I’m going to show you the number I’m waiting on, what the roll pays when it gets here, and the version I’d use instead if I wanted another week.
My Put Hedge Is Paid For And Sitting At The Money
Let me lay out where this stands. I’m simulating the whole thing on a $100,000 portfolio correlated to the S&P 500.
I sold call verticals and used the proceeds to buy puts. A vertical means selling one strike and buying a further one above it to cap what the trade can cost me.
Those spreads brought in $5.41.
They came back down to 12 cents. I bought them back and took that side off completely.
Here’s the put hedge as it sits right now.
- What I own: Two 757 puts for the September 18 expiration
- What I paid: Nothing, because the call verticals sold for $5.41 and closed at 12 cents
- Where SPY is: 757, right on the strike
- Time left: About three and a half days
- What it’s doing today: Nothing, because it hasn’t gone in the money
Pull up the risk graph and you see a V. The low point sits at 757, and every dollar below it cuts my risk instead of adding to it.
That V is the whole reason I built it this way.
Once 757 breaks, the delta on that put runs toward one in a hurry. Essentially, it starts moving dollar for dollar with the market against my stock.
Three and a half days is enough time for that to happen.
When Rolling A Put Hedge Actually Pays
I don’t roll at 757.
I want to be about $4 in the money first, which puts SPY near 753.
Pricing that roll takes a workaround. Tomorrow’s quotes don’t exist yet, so I approximate by moving the strike instead of moving the market.
A 761 put is already $4 in the money with SPY at 757. That’s what my 757 put looks like once we slide to 753.
So I price the roll off 761.
Rolling means I sell the strike I own and buy a lower one. That books the gain and resets my coverage underneath the market.
From 761 down to a 30 delta at 750, the credit comes in around $450 a contract. I hold two of them, which puts the roll near $900.
The shallower version shows you what patience is worth here.
From 759, only $2 in the money, that same roll down to 750 brings in about $343 a contract. Two of those gets me roughly $700.
I’m looking for $1,000.
Here’s the setup as I have it working.
- Setup: Long two 757 puts for September 18 expiration, against a $100,000 portfolio correlated to the S&P 500
- Trigger: SPY near 753, roughly $4 in the money on the put
- Target: $1,000 in credit rolling down to the 750 strike on the same expiration
- Edge: The call spreads already paid for the puts, so every dollar the roll brings in is booked gain
There’s a second version if I want more time instead of the credit. A 30 delta put out on September 25 costs about $4.25, and my in-the-money September 18 sells for around $7.
That swap picks up $600 to $700 and buys me another week.
If we drop below 757 today, I’d rather keep it in this week and roll down to 750. Should we keep sliding toward 753, the next strikes I’m looking at are 745, 744 and 743.
Where My Put Hedge Sits Going Into Tomorrow
The map underneath the market says this gets decided quickly. Losing 755 opens 750, and there’s nothing on the call side holding price up.
That’s the exact stretch where the roll gets paid.
My put goes to work on the same break that takes the market lower. A rally tomorrow takes the other outcome entirely.
The put hedge lapses, and it cost me nothing to have owned it.
I’m sitting on the edge right now, and that suits me fine. The whole point of financing the put with those call spreads was to reach this moment without having paid for the privilege.
That’s the process I run with members every session. I pull up the Console live, walk the prints that carry real structure, and translate them into levels, targets and coverage while the market is still open.
The atomic hedge plan sits in the Block Hunter library alongside 13 other trading plans. We work the positioning live in the mastermind sessions.
Tomorrow is going to move this market.
Ninety days is enough time to see a signal fire, put coverage on while it’s cheap, and manage it through whatever comes next.
👉 Join the 90-Day Block Hunter Challenge
Brandon Chapman, CMT
Creator of Ghost Prints
