August 24, 2017

S&P Moves Ever Closer to Closing 4/20 Gap and “The Option Strategy”

The S&P 500 (SPY) pushed lower today to come ever closer to closing the gap from 4/20. SPY moved fell to a low of $132.12 before bouncing to close the day over $1 higher at $133.17. It would take a move to $131.35 for the gap to officially close.

My stance is that we shall see a series of gaps close this summer beginning with the 4/20 gap, followed by the 12/1/10 gap at $118.01 with the potential of a close of the 9/1/10 gap at $104.41 the bears truly take control. I do not expect the latter gap to close this summer, but it would not surprise me to see the gap close over the next 12 months.

For me, it truly doesn’t matter. I enjoy speculating (like everyone else) where the market is going to go, but no one really knows. I do not have the magic crystal ball, no one does.

As an options trader I try not to play this fool’s game. Various options strategies allow me the privilege to rid myself of the exactness of picking stocks that only make money if they move higher. While this is enjoyable for some it does not make the most sense to me as an investor or trader.

I prefer to allow probability to lead my investment journey. I know what to expect, I know the odds and I can create risk/reward scenarios that meet my risk tolerance for any given scenario. This is why I am an options trader.

No one said it was easy. Understanding options at their core isn’t easy.  This is why so many people avoid them at all cost. They think options are too risky. And they are right, in some instances. Options can be used in overly aggressive ways. But I keep it simple.

While I use a variety of income-based options strategies through selling premium (more advanced options strategies), my favorite strategy is the HPMR. It allows me to be as aggressive as I want to be. It gives me total control of the trade, well almost.  So far the strategy has worked for me and since I introduced the strategy to my newsletter subscribers it has worked for them. Check out the results on my third-party monitoring site.

I hope to cap my newsletter service soon at 100 subscribers. I am 75 percent of the way there and hope that by the end of the year I am at capacity.

I don’t market, my service has gained traction through word of mouth. It has been a slow process, but it has worked. My belief has always been that if the strategy doesn’t work than I should just stop using it – unlike other newsletter services who pay out the you know what to continually market their sites and successfully trap investors into buying into their service, only to see their accounts dwindle over the following months. It is the treadmill cycle of the newsletter industry – I can’t tell you how many times I have witnessed this over the years. 

But unlike many of the other newsletter services I choose not to take this path.  As a result, I can proudly state that I have a loyal and thoughtful group of like-minded investors who know that patience is what it takes. They support the strategy and its mission. As I always say, this is a marathon and not a sprint.

I hope some of you take this to heart and give my strategy a chance. Let me prove to you that the strategy is worthy of your long-term commitment. If anything let the performance speak for itself. It has so far.

Anyway, as for today’s potential trade, well, I decided to stay away. Both EWY and EPI have incredibly wide bid/ask spreads which make me a bit uncomfortable. So much so that I might have to take them off my ETF list.

S&P futures are higher as I write this tonight, so I expect to see a bounce tomorrow. The bounce could last until options expiration passes, but once it does I expect the bears to move back in to push this market lower. My hope is that we see some extremes soon. Until then I will be patiently waiting on the sidelines aloowing the set-up to move towards me and not the other way around.

Have a great night!

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