March 4th – Busy day setting up both ways

Good action on the morning gap down.


I have been making some plays and putting capital to work today. I am certainly ready for some action. With that said, I am fairly conservative in my style.
Nearly everything I have on right now is benefiting from Time decay, although I do have 600+ positive deltas. This is mainly coming from my bullish MSFT (covered positions) and T (Credit spread positions).
At 1:10pm Eastern we are at a VERY important inflection point. The 61.8% retracement from the Jan Low and the Feb High. The market is at this point with an Adv/Dec Line of 93/404… bearish, and a TRIN reading of 1.6… Again Bearish.
SPY%203.4.gif
The Market was certainly scratching bottom today. It was at the lowest end of the downward range from two weeks ago. And because the we have come so far so fast, I see a possibility of short term relief rally today. And that is why I got long in certain issues. That said I have put on some medium term bearish positions in the form of Calendar spread. Today we are 45 days from April Expiration. That is my opening window for these spreads. We should see the most theta decay from the front month spread within this 45 day window.
MSFT – Received an upgrade today so I like that with the major support of 26.75 below us. My positions benefit from sideways to upward movement.
T- I added 1 – Apr 32.5/35p credit spread for 1.11 with the underlying @ 34.45. These were at the lows of the morning session.
FAST – 2 units of the Apr/May 40p for .48. Hopefully it with be going nowhere “Fast”. I have been trying to get this filled for two days now, and finally I picked some up. There is lots of premium and a 3:1 reward to risk ratio. Breakevens are 36 and 45. Also, the front month Volatility is 51.6%, with the back month @ 47.55%. I like this slight Vol skew due to uncertainty in the market.
FAST%203.4.gif
SMH – Apr/May 26p for .29 and .30. I am playing this conservatively to the downside with 3 units on so far. Breakevens are 29 and 23. With the Semiconductor index breaking below it’s channel I found a very nice risk to reward trade. And with front month volatility pumped up, and the back month relatively cheap this made this a very appealing trade.
MRVL – Added 5 units Apr/May 10p for .15. With Breakevens between 8.70 and 12.
MRVL.gif
At midday, my acct is up .2% on the day. I find this to be a good sign on day in which I am entering a number of positions!
UPDATE:
Now that the market has been closed for a few hours, and I have had time to think (aka Walk the Dog, and shovel 2 feet of snow off the cover of my porch). It feels like this down move may be exhausted. We may have one more downward gap in the morning, I have no idea. But what I do know is that the past 3 days have been quite bearish, and that can’t last forever. Not to mention we have moved down 2 times the previous trading range in just the past 5 days, and the S&P made a bullish hammer today. Personally I would like to see a gap down open.
I do think we will go down in the medium term, but I am about ready to bank my profits from the down move. This is typically a weakness in my directional trading. I don’t ride trends long enough. I do have a number of calendars which will benefit from down moves, but my Bear Put spreads have done beautifully. I will look for new short entries as we ride strength back to the top of the trading range, or if we break below support levels.
All and all I have had a good 2 1/2 weeks of trade as the portfolio is up 8% in the past 12 trading days. Currently I am in 62% cash, and 38% invested (which is alot for me).
jon

Leave a Reply

Your email address will not be published.