Technical Tuesday – Testing the 200 DMA’s

chartWheee – what fun! 

Up 500, down 500 – what volatility?  Yesterday the Volatility Index (VIX) did hit 25 and that's great for us as we get good money for the options we like to sell.  We're generally just amused when the market collapses as we have great hedges, like the one we posted in Thursday morning's PSW Report:

As an additional hedge, at the moment, I like for the STP:

  • Sell 4 WHR 2020 $125 puts for $12.50 ($5,000)
  • Buy 50 SQQQ May $16 calls for $3.90 ($19,500) 
  • Sell 50 SQQQ May $20 calls for $2.20 ($11,000) 

That's net $3,500 on the $20,000 spread that's almost all in the money to start and the only way to lose is if the Nas goes up quite a bit from here which, with all these headwinds, doesn't seem too likely.

The WHR short puts are still $12.50 but the $1.70 spread hit $3 for a gain of $1.30 x 5,000 units for $6,500 (185%) gained in 2 trading days – you're welcome!  Remember, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you.

In our Live Member Chat Room we already cashed in the long calls ($4.50) and left the short calls which are covered by another hedge we already had.  That pulled $22,500 off the table – more than the maximum we expected to make on the trade but now we have to deal with the short calls so we're hoping for a bounce in the Nasdaq as we test the 200-day moving averages.  

 

IN PROGRESS