We currently have two options positions that are deep in the money, and I just want to explain to the newbies how to best maximize their profits going into tomorrow’s January options expiration.

These comprise:

The S&P 500 SPDR’s (SPY) January $185-$190 in-the-money vertical bull call put spread with a cost of $4.58

The IShares Barclay’s 20 Year+ Treasury Bond Fund (TLT) January $125-$128 in-the-money vertical bear put spread with a cost of $2.70.

Here’s the easy part:

As long as the SPY closes at $190 or above at the close, the position will expire worth $5.00 and you will achieve the maximum possible profit. The nine-day gain on the trade will be 9.2%.

In addition, as long as the TLT closes at $125 or below at the close, the position will expire worth $3.00 and you will achieve the maximum possible profit here as well. The seven-day profit will be 11.1%.

Since the bond market closes at 3:00 PM EST on Friday, don’t expect much price movement after that.

Better than a poke in the eye with a sharp stick, as they say, especially in these difficult trading conditions.

In this case, the expiration is very simple. You take your left hand, grab your right wrist, pull it behind your neck and pat yourself on the back for a job well done.

Your only problem now is to figure out how to spend your winnings.

Your broker (are they still called that?) will automatically use the long SPY call to cover the short SPY call, and the long TLT put to cover the short TLT put, entirely cancelling out the positions.

The profit will be credited to your account on the following Monday, and the margin freed up.

If doesn’t, get on the blower immediately, because broker computers sometimes make mistakes, and they will always try to blame you first.

If an unforeseen event causes the SPY to collapse to the downside before the Friday close, such as if oil decides to crater once more, then things start to get complicated.