by Dan March 10, 2011 10:19 am • Commentary
With the S&P 500 down 1.5% this morning I thought I would take the opportunity to update my views on some of the trades that I have suggested lately on the website and how I am managing them personally.  Considering almost all have been expressing bearish views (trust me, I’m not taking a victory lap because there is a lot more to do here) but managing trades whether they are winning or losing is an important part of risk management.

First things first, I am no economist or broad market strategist, but usually I like to form my own top down view of the current and near term market environment. For the last 2 months I have thought that the market was underpricing many risks in the global economy and continues to do so….of the most important: European sovereign debt issues, geopolitical instability in the Middle East and the risk of it spreading to more important players in the region (Saudi Arabia.) China and Brazil’s ability to negotiate soft landings for the past years expansion of their economies, massive commodity inflation the world over and importantly our our issues at home with sluggish jobs growth, stagnant housing market, GDP growth that feels like it could be thwarted politically at any moment, just to name a few…….But all of these potential issues and their potential affect on our markets that we make our living on trading have felt to me in no uncertain terms unrepresented in major market indexes they were touching multi-year highs….


FEB 14, 2011: SPY

TRADE: BUY the Mar SPY 132/128 Put Spread for ~1.00
-Buy 1 SPY Mar 132 Put for 2.00
-Sell 1 SPY Mar 128 Put at 1.00

UPDATE:  this pit spread that i paid 1.00 for is now worth 1.80, i think u have this one right where u want it and if u remain bearish than stay the course, but at any point you feel that the market has stopped going down, treat it like being short the SPY and sell the spread…..

FEB 24, 2011: AAPL

TRADE: AGAINST A LONG–BUY AAPL July Put Spread Collars BUY the JULY 340/300 Put Spread for ~12.00
–Buying 1 July 340 Put for 22.00 and Selling 1 July 300 Put at 10.00)
SELL the July 390 call at ~11.00
-Structure costs you ~1.00 or less than 1%

UPDATE: if you are long keep this structure on, if you were to buy this here would cost you about $3.50 with the stock at nearly the same level at where i suggested it on Feb 21,2011.

Feb 24,2011: AMZN

TRADE:  BUY APRIL 170 / 150 Put Spreads for ~4.25

-Buy 1 Apr 170 put for 5.75 and

-Sell 1 Apr 150 put at 1.50

UPDATE:  This $20 wide spread is worth 7.25, I think this stock will be the poster child for a sustained sell off, stay long this spread if you have it on, it is right where you want it…..I will say though that yesterday after showing relative weakness to the Nasdaq for a week or so, started to firm up a bit and closed well off of its lows. I want to watch for an intra-day reversal in this name, could come on a day where it is down a lot, so don’t be a pig. If you think the stock is getting a little overdone on the downside at some point, be quick to take some profits, or maybe take off half of the position. If you did that when the spread is worth 8.50, it would lock in the entire cost of the original trade and you could let the other half ride….

FEB 28, 2011:  SDS

TRADE: BUY the Mar 21/22 RR and take in a .20 credit with stock at ~$21.05.
-Sell 1 Mar 21 Put for .50 and use the proceeds to
-Buy 1 Mar 22 Put for .30

Mar 2, 2011: SDS Update

SO now i want to cover that Mar 21 Put that i shorted at .50 and pay .30 (locking  in .20 profit) and then Stay long the Mar 22 call that i bought for .30…..But to further lock in gains i want to now SELL the Mar 24 Call at .20.

NOW  I am LONG the Mar 22 / 24 Call Spread which is worth .40.…that’s all you can lose at this point….and  you can make up to 1.60 if SDS is 24 or above on Mar exp.

UPDATE: This is a good example of trade management, I got direction right and took off risk and then defined my risk while keeping my same view….keep this on.  This spread is now worth .30 and has the potential to make 1.00 more if stock is 23 or higher on expiration next week…

March 1, 2011: GLD

TRADE: GLD BUY THE APR 140 / 148 CALL SPREAD for ~$2.00

-Buy 1 APR 140 CALL for 2.80 and

-Sell 1 APR 148 CALL at .80

UPDATE: Gold puzzles me here, would have thought on a day like this that GLD would act better, but that has more to do with $ strength than anything else….unless the $ is going to make a sustained move I like this spread still. The only thing I would probably do here is cover the APR 148 call for ~.30 which is only about a 10 delta option and just stay long the 140s….at some point if GLD rallies i would look to turn back into a spread.

March 7, 2011XLF

TRADE: Buy short term XLF Put Spreads to Benefit From Impending Financial Sector Weakness….Buy Apr 16/15 PS for .23

-Buy the Apr 16 Put for .36 and

-Sell the Apr 15 Put at .13

UPDATE:  This spread is now worth .20 and not a meaningful change, yesterday I actually added to it when it was offered at .15…i still like the potential for estimate reductions to hit the bank stocks before most of them even report in mid to late April. Stay the course.

March 9, 2011: RIMM

TRADE:  BUY the APR 62.5 / 57.50 Put Spread for ~1.60

– Buy 1 APR 62.50 Put for 2.80 and

-Sell 1 APR 57.50 Put for 1.20

UPDATE: This spread is now worth 2.10 and I think you hold on. The stock acts worse than the market and now the strike you are long is in the money. Will be interesting to see how stock acts into wall street previews of Mar 24 earnings and Playbook launch.