Buying a SPY PUT options

Entry on Wednesday 15th Feb 2017.

SPY at all time high

Market gap down and did not recover

Almanac indicates next 2 days high probability of down.

Economic announcement.

Poor consumer oil demand.

Rising interest prompt people to cash out their profit and reduce their loan.

Many stocks at all time high.

Wednesday entry brough0.25 delta PUT at $1.

The market internal seems struck at SPX 2338.

Drop down to 2336 during market noise.

Replace order to $1.05 chasing the options.

But looking at the TRIN, the whole market seems bullish.

The TICK is bearish. These indicate a bear trap of bull covering.

The chart really went up a little.

The market order is close to my $1.05. Immediately I change my mind and revert back to bring the options at $1.

Shortly after, the order is filled at $1, when SPX is at about 2340.

VIX increasing while the SPX increase is unusual and indicate that the market is fearful (of bear) while the market rise.

Shortly after the order is filled at $1 when the SPX is at about 2340, the chart rally up to 2341.28.

The day is an algo day, and gap is not big enough to peek at the market direction.

Didn’t managed to use MRE as entry.

The behavior is quite tally with the Almanac with 70% bull. The next two day will be super bearish.

Putting this trade a high probability.

Today news retail report seems positive.

Not much news to move the market for the next 2 days.

Super strong bull at 11.17am with SPX now at 2344.23 with PUT option down to $0.97 at 11:37.

SPX went down to 2341.63 is higher than my entry, but my PUT is worth $1.04, $4 profit.

According to plan. However this is still a bull covering. I suspect my PUT value should remain this value of $1 as the SPX climbs higher. VIX is increasing.

Other odds, Trump’s presidential day (holiday), Hanjin shipping bankrupt. People may want to get out of position before the holiday.

On Friday, it is a very bearish day in the morning session.

However in the afternoon, the market went up to 2351.16 making the day a bull day.

Why I lose this trade?

  • buying a bear position in a uptrend seasonal.
  • Trump’s rally period.
  • a bit greedy. Thought that the morning is very bearish but didn’t expect the afternoon to change complete direction.
  • holiday rally.
  • should put a trailing stop to protect capital first.
  • sold 2x options resulting in a naked options position (sold 2x $0.91 options). Did OCO wrongly, while duplicating an order.

 

Lucky on Tuesday (21Feb 2017), market gap up at $0.75 making $15 back, breaking even, covering all the cost. Options continue to drop to $0.65 but I don’t bother already.