Random Walk Trading
June 5, 2014
The Dow is at 16,800
Do you know where your puts are?
That is right. The Dow is now up 76 points at 16,814.
POT people… We got filed on our 1-5 call spread for a $0.05 debit and this is a wonderful thing. The cash was down over $1 and s now up almost $1. That is a $2 swing from were the trade was put on for an upside move with the Dow just under 17000 as the sweet spot.
SPX
We sold the weekly SPX 1925-1930 put spread at $2.90 the other day when it was slightly ITM. It is now trading for $1.15. Nice!. The question is, does one take it off or spread it off, or what?
I don’t know. I was tempted to get short here at 16,800 but it is holding nicely and not showing signs of backing off at all. When the market is up almost every day, albeit minimally, it makes it hard to not bet on red. How many times in a row do you see green pop up where you just have to say āit has to come up RED onceā.
But this is what I was referring to when I said that after the stale market of not moving anywhere ends we should be entering the third stage of the bull market. The one that is nuts and short lived. The one that has the biggest bulls afraid and bears scratching their head turning bullish.
Now that we are less than 200 points away from 17,000 I am instituting the game plan I have been talking about in POT for many, many months.
As for the ANAY-CYSTS….I can’t even listen to them. You are on your own listening to the talking heads. The weird thing is that most of them are under contracts where they can’t invest in the markets, so you would think that they would want the Dow at 1,000 so when they can invest it is low. Not these geniuses. They are going to have a party at 17.000 on all the money they didn’t make. Lol
PERMA-HEDGE !
Last night in POT I discussed this hedge I am introducing where I buy a $15 or $20 put spread in the back month SPX and am selling a front month ATM $5 spread for about the same price. Every week that the market goes up I sell another ATM put spread. Hopefully I dodge the bullet the first week at least, but it is a good way to keep long deltas and a hedge simultaneous.
This weekend POT people will see me writing about it and it will be available early next week for POT people.
I will keep you posted.
