2nd Trade Update $SPY: Spreading July Puts In Front Of Holiday Week

by Dan June 28, 2013 3:06 pm • Commentary

Trade Update June 28th, 2013 at 3:06 pm:  With the weekend upon us and little  movement in the last day since I added to my SPY put position I am going to look to spread the July regular expiration puts that I own with some weeklies that expire next Friday, July 5th.  The weeklies are attractive as there is only 3 1/2 days of trading with the closure on Wednesday afternoon and Thursday for the July 4th holiday.  

Action: Sold to Open SPY ($160.75) July 5th weekly 158 Put at .50
New Position: Long SPY July20th 160 / July 5th 158 Put Spread for 1.85





Trade Update June 27th, 2013 at 9:41am:  With the SPX up ~80 bps since my bearish trade yesterday morning, I am adding to the position now, doubling up as I think we are right in the technical resistance level that Identified yesterday.  

Action:  SPY ($161.22) Bought July 160 Puts for 2.00, my new avg is 2.35

I will look to spread by selling a lower strike put on a sell off back below $160.  I will also use a close above 1620 in the SPX as a level that I will look to reduce risk.



Original Post June 26th, 2013:  New Trade SPY, Selling Rallies

We have been on the record since late last week that we think the upward momentum to the equity rally has broken and that as traders, we would be sellers of rallies.  Over the last few days, we have taken off single stock shorts in anticipation of what we thought could be a re-test of SPX resistance at 1600/1610 with the 50 day moving average of ~1620 being the line in the sand.  Given the near 50% re-tracement off of last Wednesday’s highs and with the SPX nearing its first level of technical resistance, we want to use a little of the dry powder from our recent short covers to start to leg into new bearish positions.

The 1 year chart shows that the major trends have turned, with the 50 day ma and the 20 day ma both looming above, with a large amount of overhead supply from trading in May and June:

1 yr daily chart of SPX, with 20 day ma in pink, and 50 day ma in green, Courtesy of Bloomberg
1 yr daily chart of SPX, with 20 day ma in pink, and 50 day ma in green, Courtesy of Bloomberg

The major support level is around 1535-1540, highlighted in red.  That’s where we’d look to take off this trade.  We view the technical positioning here at 1600 as highly favorable for a short side trade given the overhead resistance at 1610 to 1620, vs. support down at 1540.  


TRADE: SPY ($159.85) Bought July 160 Puts for 2.70

Break-Even on July Extirpation:

Profits: below 157.30

Losses: up to 2.70 btwn 157.30and 160 with max loss of 2.70 above 160

Trade Rationale: SPY vol much cheaper than single stock vol that we are looking at, we will look to spread these on a decline back to the 1575 by selling a lower strike put.