August 19, 2017

Is this the Beginning?

Today began like most others during this five year bull phenomenon…bad news equals gap lower open only to be immediately pushed higher by the bulls. But the ending this time was far different than most of the other trading days we’ve been privy to recently. We saw a nasty sell-off into the close.

Yes, the bears reign supreme for at least a few blips on the screen. And strangely enough things feel different this time around. The market feels top heavy and so it should…just look at the performance of the S&P 500 (SPY) market over the past five years.

10-7-13 SPY

Will the bears continue the charge lower? I’m inclined to say, YES! But, I think we’ve all been inclined to say yes on numerous occasions only to be fooled by the fed-fueled rally time and time again.

So, how am i playing the current price action?

I have several credit spreads on, including a few bear call spreads and some far out-of-the-money iron condors to take advantage of the pop in implied volatility. Oh yeah, and I bought, yes bought, a few SPY puts Friday.

But my style is all about selling options and as you can see by the chart below, now is an ideal time to start selling options.

10-7-13 VIX

An increase in the VIX directly correlates to an increase in the price of options. Simply stated, we can sell options for much higher prices and who doesn’t like to sell tings for significantly higher prices knowing that people, in our case, speculators are always willing to buy. This is when credit spread strategies shine and we are seeing that in our returns.

Anyway, we have a few short-term extremes that entered the market, but for now they only warrant a watchful eye for true short-term very overbought/oversold extremes.

Tomorrow, I’m going to discuss the VIX and how to take advantage of it in much greater detail. Stay tuned!!!

10-7-2013 4-58-32 PM

If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.

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