| This Trade Was Updated April 23, 2012 |
With today’s gap down, I took the opportunity to modify this trade, turning it into a put spread. Sold the May $133 strike put @ 1.49. Cost basis updated to a net CREDIT of .04
Today we have a dead cat bounce running into a an area of resistance around $138.80 – $139.60. Note the bearish divergence in the Force index indicator, and the inability of the MACD indicator to challenge its previous 2 peaks at this price range. Stochastics are overbought, and Implied volatility is oversold. 2 indicators at extreme levels providing us a nice risk/reward scenario. My general outlook on the market is that we will be in a trade range until October, so selling this rally as it hits the top of a channel matches up with my view. If the SPY runs down to $135 before May, these puts should be valued at $2.96 or greater.
Trade Details
- The Ticker: SPY
- Cost: $.04 net credit per share
- The Trade
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Was previously long the 135 puts at 1.45. Then on 4/23, sold the $133 puts at 1.49. Now this is a vertical put spread with a cost basis of (.04)
- Trade Opened: April 17, 2012
- Trade Modified: April 23, 2012
Chart courtesy Finviz. Click to open larger.
Additional Image Provided by Terrence:
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