Considering Our Options – $QQQ: Queued Up

by CC September 28, 2015 3:34 pm • Commentary

On August 27th we faded the rally in the broader market off the lows of August 24th with a put spread in QQQ when it had bounced to $105 (off the August 24th low print of 84.74!) Obviously the prints on that morning were quick and illiquid so it’s better to treat the real lows of that day more like the low 90’s. But the bounce to 105 was sharp and we wanted to fade it. So here was the original trade on

Trade: Bought to open the QQQ (105) October 105/92 put spread for 3.00

  • bought to open 1 Oct 105 put for 4.00
  • sold to open 1 Oct 92 put at 1.00

With the QQQ now down about 10% from the post August 24th bounce this trade is now worth a little more than $5. So it’s a decent winner here but with a lot of potential down to $92 in the QQQ where it could be worth as much as $13. The next level to watch for in the QQQ actually comes from the SPX level of 1867 which was its low on August 24th and a level it then held the next day on August 25th. That’s not far away and at that point if the market looked like it was going to bounce hard we’d probably take at least some profits in the QQQ trade, if not the entire thing.

Not withstanding the SPX, for the QQQ itself the next obvious support is probably around $98. That could happen quick with a swoosh below in the broader market so we’ll be watching that level as well.

Right now the trade is about 65 deltas so it could quickly become a double from the $3 cost. Then again, if the market breaks that 1867 level in the SPX who knows how low it can go (and in a hurry) so we’ll try to be patient. But if those levels do hold look for us to close at least part as even here the trade is intrinsically only worth what it is trading.