Taking Profits: SPX Calendar Spread

According to the rules in my trading plan, I took profits on the SPX Calendar Spread that I placed just last week.

My profit taking rules are simple: When this trade gets to 15-20% profit, I remove the trade. We originally purchased this spread for 11.50 and were able to sell it back for 13.90. That is a profit of 2.40 or $240 per contract, and a profit of 20.8% on capital.

Here is a look at what our risk profile looks like when we come into a profit like this so cleanly:

The solid white line shows our current profit relative to our max profit/loss which is represented by the solid red line. The current price at which we are trading is shown on the dotted white line. It is represented by the orange vertical line.

Now this trade only took 1 week for us to come into a profit, and no adjustments were needed. But that is not how every one of these trades will turn out. Since this is an income trade, I will continue to place them every month so at some point I will be able to show you how I make adjustments, and when I decide when the trade will not work out.