Disclaimer: The information found on this site is meant for educational and informational purposes only. Nothing on this site should be construed as a recommendation or solicitation to buy or sell derivatives or securities or to trade any particular strategy. Trading of derivatives or securities has large potential risk and you must be aware of and accept all the risks. Past performance of any trading system or methodology is not necessarily indicative of future results. No representation is being made that any account will or is likely to achieve performance results similar to those discussed on this website. Hypothetical or simulated performance results have certain limitations and do not represent actual trading.

Sunday, October 24, 2010

SPY Continues to Rise Without Meaningful Correction

-I have to admit, in hindsight, my profit/stops were too tight. The biggest problem with having profit/stops that are discretionary without having concrete rules for reentry is that one could miss out on a monster trend.

-I thought SPY would go through a price correction last week, but SPY continues to rise. I was stopped out at 116.6, but SPY closed the week at 118.35. If I get back long SPY and prices fall, I would feel like an idiot, but on the other hand, if I chose to sit this market out, but SPY continues to rise I would feel even worse.

-All of my technical indicators are telling me to get back long the SPY again. Only the Future Volatility Estimate is telling me that the probability of a price decline is increasing. And because implied volatility on options is cheap, I would recommend buying 1 SPY November 117 call option and selling 1 SPY Nov 121 call option for 2.10 or less. This way, we would get some participation to the upside, but limiting our downside to $210.

No comments:

Post a Comment