I’ve been in the market long enough to know that volatility is the norm rather than the exception. When the market sees a 10% correction and seems ready to bounce, I lean on SPX (S&P 500) and XSP options trades to help me navigate the noise.
These trades aren’t about guessing market direction — they’re about structuring risk and defining profit potential.
Strategy Overview
I often set up a broken wing butterfly on SPX — a play that captures movement without exposing me to unlimited risk. I then offset that with a butterfly spread on XSP. That combination lets me collect credit while guarding against major reversals when the market swings.
I keep a close eye on technical markers, especially around the 5,700 zone on SPX. If the price holds above that level, I lean bullish…
If it falls below, I adjust my positions to hedge further. It’s about taking small, calculated bets that align with what the charts are telling me.
Risk Management
Risk management is everything in these volatile sessions. I stick to trades with defined risks — whether it’s a debit spread or a credit spread — so I always know my downside.
For instance, setting up a bull put spread in XSP helps me collect premium while banking on the market staying within a conservative range. I routinely watch for signals in broader market sectors.
Health Care (XLV) and Financials (XLF) often add stability during these swings, reminding me to scale my trades in line with overall market momentum.
Using SPX and XSP together is not about chasing big, unpredictable moves. It’s about positioning for a controlled rebound after a corrective drop. I’m not hoping to predict a massive rally — I’m just trying to take advantage of the range-bound behavior that tends to occur after a 10% pullback.
With careful adjustments and a steady focus on support levels, I manage to stay profitable even when the market is anything but predictable.
In volatile times, the key is to remain nimble and disciplined. Measure your risk, follow your technical setup and be ready to adjust when the market tells a different story. With these SPX and XSP strategies, you can not only survive the swings — you can position yourself to profit when the dust settles.
Trade Examples
Let’s discuss two option trades I had open using SPX and XSP. Here’s a simple breakdown of exactly what I’m doing and why.
SPX Trade Setup
I’m running two different positions on SPX right now.
First, I’ve got a broken wing butterfly positioned around the 5530 strike. I opened this for a credit of $120.
Second, I’ve got a traditional butterfly spread at the 5500 strike, which cost me $55 to set up.
If SPX settles near my pin strike, the broken wing butterfly will yield the full $120 credit, offsetting the $55 debit from the standard butterfly. That leaves me with a net profit of $65 per contract.
XSP Credit Spreads
In XSP, I’m managing several bull put credit spreads at the 560, 550, 545 and 530 levels. Right now, XSP is hovering around 561, keeping these trades in decent shape. They’re tight, but as long as XSP stays above those strike prices into month’s end, I’m positioned well.
Currently, these spreads have an unrealized loss of roughly $2,700, but if they expire above my strikes, I’ll capture about $1,000 in premium. My maximum risk per spread is around $2,000, offset somewhat by the premium I’ve already collected.
Market Context and My Strategy
The S&P 500 just pulled back exactly 10.05% from recent highs — a precise, textbook correction. Now, I’m looking for a short-term bounce into the 5,800 to 5,900 range on SPX. Specifically, I’m closely watching Fibonacci retracement levels around 30%, 38%, and especially the key 50% level. That’s where bulls and bears are likely to battle it out.
I’m cautiously bullish right now, positioning trades to capitalize on a relief rally. But I’m fully aware there’s downside risk if we break recent lows again. I’ll quickly pivot to hedging or reducing risk if the market turns lower.
What’s Next
If SPX stabilizes or moves slightly higher, I’ll take profits on these butterfly positions. I’m also keeping a close eye on the 5,800 to 5,900 range as a key resistance zone for profit-taking or adjustments.
If SPX breaks lower again, I’ll quickly hedge or trim exposure to protect against additional downside.
Bottom line — this positioning lets me benefit from a near-term rally while carefully managing risk in a volatile time…
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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