Enjoy
the holiday. Personally, I like the fireworks. Not so much in the
markets, where I prefer calm conditions. This week was anything but
calm.
Schwab
sent out a report that included a table with 14 news events and how
the market reacted. The events ranged form the Kennedy assassination,
Nixon resigning, to Lehman going under. Out of the 14 the median
decline was about 5% in about a week. However, there where three
events that led to bear markets (more than 20% decline) and three
others that led to a correction (10% or so). So about 42% of the time
the market reaction is significant.
Some highights: buying the SPY highs on
Monday. I bought some insurance in the form of a long SPY September
vertical put spread. New long position in NKE. I got washed out on a spike down in SKX and
rebought at a higher price. The new thing was a fancy put backratio
position in IBB (biotech etf), hoping for about a 20% decline in that
sector by September expiration.
Here
are the trades: (p = puts, c = calls, all are third week expiration
unless noted, sell means sell-to-open):
Thu
Sell SKX Aug 90 p @115.3 Rebalance with another layer of puts in
Sketchers as the rally continues.
Wed
Sell SPY JulW2 198 p @207.8 Rebalance in S&P 500 by selling a
layer of weekly puts seven days out.
Sell
IWM JulW2 119.5 p @126.0 Ditto for the Russell 2000 etf, sell a layer
of weekly puts.
Sell
NKE Aug 97.5 p @109.0 New long position in Nike. Recent NKE earnings
were good.
Sell
SKX Aug 95 p @112.7 Rebalance in Sketchers. I got shaken out of one
leg earlier in the week as the stock knifed lower. I am adding back
to the long side by selling some August puts.
Sell
DIS Aug 105 p @115.0 Rebalance in Disney on the rally.
Sell
IBB put backratio @368.6:
Buy
1x Sep 330 p / Sell 2x Sep 300 p debit
Okay,
now I'm getting fancy. This put backratio on the Biotech etf is near
delta neutral, and is for a debit. Best case is a decline to 300 at
September expiration. If IBB is flat or up, I lose the modest debit.
If IBB crashes, losses escalate below 270. I am taking a shot at a
10% stock market correction with more 10% down in the biotech sector.
Tue
Sell HON Jul 97.5 p @102.6 Rebalance again in Honeywell.
Cover
(buy to close) SKX Jul 105 p @108.2 Close this leg on Sketchers for
about a 40% loss. SKX not acting well after a big run up, so lots of
air on the chart. Minor support at the 50 day moving average around
102.
Sell
IWM Jul 129 c @124.6 Rebalance in the Russell 2000 etf.
Mon
Sell JPM Aug 72.5 c @68.1 Rebalance in JP Morgan Chase.
Sell
SPY JulW1 202 p @208.6 I sell some weeklies expiring in three days on
SPY. Support is at 204. I am selling near the 10% probability line.
The bears hit the market with a flurry, but the market popped back
up. Not much premium considering the margin requirement, but it is
only three days. By mid-day SPY makes new lows, so this was a bad
move. Later in the day with SPY @206.2 I buy a vertical put spread:
Buy
SPY Sep 190 p / Sell SPY 182 p @206.2 for a debit of close to $1 per
unit after commissions. This is a bit of insurance against a melt
down. Typically, I might do a backratio, but the tape action is so
bearish, paying $1 per unit for a bit of insurance seems like a good
idea.
Sell
IWM Aug 133 c @125.7 Rebalance in Russell 2000 etf into the decline.
Sell
DIS Aug 125 c @113.8 Rebalance in Disney by selling another layer of
calls.
Sell
HON Jul 105 c @101.9 Rebalance in Honeywell.
Position
Summary:
long
BRKB DATA DE EL FB NKE
net
long DIS HON IWM JPM MRK SKX UNH YUM
net
neutral AMBA IBB SPY
net
short SKX
short
MCK
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