Friday’s move to almost 3 month highs in the SPX was certainly unexpected for me. I had built up an array of August put and put spread positions in anticipation of move to test the 1300-1325 level, and a good chunk of premium evaporated in one day. Here’s the thing: the setup was a favorable one to play for a down move. A lot of indicators lined up, and markets seemed primed in various ways. So my “process” dictated the bearish bets, no matter the outcome. BUT, and this is a huge but, I should not have accumulated so much August premium. I should have been looking for some offsetting trades in case the outcome did not match my expectations. And I failed to do that, and feel foolish as a result.
But who cares how I feel? What’s important is what should I do? Since a good portion of my existing premium has lost its value, I am in premium salvation mode at this point. I am not as concerned about options that I own past August, but August is my concentrated problem. So I’ll be focusing on salvaging that over the next 2 weeks.
On to the markets overnight:
- Very quiet volume and tight range in the SPX futures overnight session. Asia followed the U.S. and Europe higher from Friday. Europe opened flat and is now trading +0.5%, and SPX futures are up 0.3%, with the 1400 level in SPX cash 5 points away.
- The dollar was actually slightly stronger vs. most major crosses, though emerging market currencies broadly higher, in line with the risk bid in stocks
- Treasury bonds are flat, and 10 year yields in Spain and Italy are lower by 5-10 bps
- Commodities are broadly lower, with gold the lone exception, up 0.25%
- Very light week for the economic calendar. Probably the only release of note in the U.S. is Jobless Claims on Thursday