BACK in the SPX game now that we got a nice move lower and I see multiple levels of support from here to 100 points down. Got filled on the following: STO 300 AUG SPX 1125/1115 Put Spreads @ $0.50 Credit = $15,000 Risk = $285,000 Return = 5.3% I see support areas at 1220, 1200, 1168 and again at 1135. 1125 was last seen in OCT 2004. Given the levels of support and over 100 points OTM after we have already dropped some 40 points the last 3 days.
It was a relatively smaller position this time. Will add next week if opportunity presents itself or do another round of ratio spreads if vix crosses over 20. Didnt want to jump all in just yet. This might very well be the next leg down to 1200.
So just like when you asked me earlier this week why I put on a bear call when the market looked (in your opinion) to be headed towards 1275 - 1290, why are you putting on bull puts when the market looks [in my opinion and to some extent your own ] to be headed towards 1200 and lower. I know your adept at adjusting and can probably handle anything thrown at you, but why try to catch, what could be, a falling knife. At what point do geopolitical realities (Middle East, oil) trump technical analysis. Same question to Coach. Is it the lure of the good premiums on the bull put side. Just trying to understand the logic, because every time I post a bear call I get questioned on my logic (which I don't mind because hopefully it keeps me honest), but in hindsight being in bear calls these last three months was a good place to be (winning trades and no stress). I wonder too if part of the answer is that I don't relish the prospect of adjusting and can't always watch my positions. Whereas you and Coach are experienced, perhaps enjoy the challenges of adjusting (or at least don't shy away from them) and are tuned in to the market all day long. I'm thinking that it might be the different mindset that explains the differences in perception. Clearly that's every one's choice but I think it's important because one needs to choose a path in trading that meshes with their mindset, their available time to monitor the market and their ability to handle the stress of adjusting. Thanks.
As worrisome as things are overseas right now, I do not see it as a festering problem that will bring the market down 100 points. I know war like actions make a lot of TA useless but my analysis of the market is that although we are in for a bumpy ride, I do not see a sharp crash coming. Oil always spikes on fears of these kinds of actions and it is hurting the market as well as some weak economic data. It will be nasty for a bit but it is the uncertainty really that spooks the market. Hopefully international pressure can bring this back to the normal "I hate you" rhetoric and the rockets will be put away on both sides. But on moves lower like this where I feel we get oversold and VIX spikes a bit is when I like to grab the spreads at times and play the non-directional move as well as the VIX move. As for adjustments, I only do them because I have to. I am quite happy to never adjust a position ever and just keep my premiums month to month. But reality is, no matter what strikes or calls or puts you select, you may have to adjust at some time and it is part of the position.
Well, if you're going to go FOTM, might as well go WTFFOTM⢠Holy cow! --- WTFFOTM⢠is an unregistered trademark of LeonPhelps.
Thanks, Coach. Here's something I could use some help on. On July 6th I had the following trade filled (I erred in my previous post on when this trade was filled). August 1345/1360 bear calls for $0.70 SPX was at 1277 As a result of the substantial drop since then, I would love to get out of this and pocket some nice premium for one week. But getting out of these bear calls is not easy even when they go way OTM. Any thoughts? I currently have a trade to buy this back at $0.10. The ToS mark on this is $0.025. The b/a is: 1345 $0.20/$0.50 1360 $0.15/$0.50 Is legging out the only option I have. I just don't know if I should risk it. Still the prospect of getting out now and having the "gunpowder" and the time to put on more August trades is appealling. I would be curious to know if you would feel comfortable buying it back $0.20 as opposed to my $0.10. One thing that has really helped me in this forum is the perspective I've gained from other's thoughts on risk/reward, how much profit is enough, etc. This is something I didn't have before and led to earlier bad trades/positions. Let me know if you think this is greed talking as I know that's something I need to control. Thanks.
Thanks, Rally. Your response confirms that we definately have different viewpoints and explains much. Still as I said when you first posted here, I think there will come a time when the only game in town might be CTM spreads. And at that time I'll probably come around to your way of thinking (just not yet). BTW: I don't mind you questioning me as it keeps me honest and forces me to do more evaluation. I do have a tendency to sometimes only use my gut emotions to place trades esp when I'm busy with work and don't have time to do at least some evaluation.
Once choice is to get aggressive on the short side in trying to buy it back if you want to try legging out. See if you can get a fill of $0.35 or $0.40 to buy back the short side (locking in a $.30 profit at a minimum). If it hits in a minute or so, then you can try and sell the 1360 for $0.20 and leg out at a nice price. However this is not something you want to leave all day as a moving market could leave you screwed. Give it a short amount of time. The other choice is see if you can get out of the spread for $0.15 instead of $0.10 today before giving in to $0.20.