XLB Vertical Put Spread Credit

I’ve been watching the Materials Select Sector SPDR ETF (XLB) for a while after I bought and sold put options on it last year and in January of this year.  I kept thinking it would fall more and hasn’t.  So I kept waiting and charting.  I was working on an XLB chart this morning for my other blog and after I saw XLB come off its low from earlier that was right on the trend line of higher lows I checked the put spreads and saw I had a possible good trade to make. 

I entered a limit order for a vertical put spread that would give me a net credit.  I priced the limit order to hit if XLB fell some, but when I finished the other post I came back and checked my limit order only to realize I was in my IRA which doesn’t allow me to sell puts the way I have it set up.  I didn’t want to make the trade in my IRA, so it’s a good thing it wouldn’t let me.  I got caught up doing my job and didn’t get back to XLB for another couple of hours.  By then I missed my opportunity to trade on a deeper dip.  I decided to get in anyway for a lower credit than I started with and could have gotten if I hadn’t messed up.

Over about a 45 minute stretch while XLB was bouncing from $22.77 to $22.73 to $22.75 my order hit in three separate trades for each side.  My limit was for a $0.70 credit for five puts.  I sold five XLB May 22 puts (XLBQV) and bought five May 19 puts (XLBQS).  I received a total of $463.23 after commissions and my total cost after commissions for the puts I used to hedge was $130.75.  That gave me a net credit of $332.48.  TD Ameritrade doesn’t charge additional commission for each trade in the same limit order if they all hit in the same day.

I’m expecting XLB to stay above $22, but bought the May 19 put as a hedge in case I’m wrong by a long shot.  If XLB falls I’d probably sell the long put to try to make a profit on it and take the option assignment from the short puts.