Tim Biggam's SPDR S&P 500 ETF Trust Trade

Tim Biggam of Delta Derivatives suggested on Bloomberg Markets an options strategy in SPDR S&P 500 ETF Trust (NYSE: SPY).

He explained that $198 was a big support for SPDR S&P 500 ETF Trust, but after the ETF fell below the support, it became the resistance. He doesn't expect to see a rally to previous highs and he thinks that the market is going to trade in a range for a while.

Biggam wants to position himself just above the resistance level and sell the February 200/204 call spread for $0.70. If the SPDR S&P 500 ETF Trust trades below $200 at the February expiration, Biggam is going to make the maximal profit of $0.70. Above $200.70, the trade starts to lose money, but the loss is limited to $3.30.