Last day of the month - in normal bullish years CNBC would be full of praises to the rules "As January goes so goes the year". I haven't heard that one too often this month.
We opened the year @ 924 and are closing around the 825 level. Down 10% - if the old saying has any value then we can expect some more this year.
The last strangle I entered I took off for a small loss. I decided not to fight it. The main reason to enter the trade was my conclusion the VIX was coming down - now the VIX has reentered the uptrend - time to take it off. As I blogged before I enter those strangles with negative delta's and short vega. If the trade goes against me I get compensated a little by the delta's. My loss was approx a 10th of my potential profit.
I am drawing a support line under the Nov lows and last weeks lows. I don't think we want to see that one break. I will be ready to add to those long term SPX puts.
I think you are correct, our close proximity to the Nov. low resistance line suggest that the best trades to counteract this possible downside risk are probably those which you are on the market for the fewest number of days. I have a butterfly on RUT which has only required a single adjustment since its conception. I'll probably take it off Monday or Tues. of next week because it is currently in its sweet spot and I would like to assume market risk for as few days per expiration cycle as possible. If I take it off tuesday, it'll have been on for a total of two weeks, ten trading days. This will give me two weeks to watch the world go by, during which time it's probably 50/50 if the market washes out by breaking the Nov. resistance line.
Posted by: Eric Kovalak | February 01, 2009 at 12:34 AM