Thursday, September 30, 2010

Be very very Careful. Buy some Insurance!

Insurance Needed
The old saying insurance while you can when you don't need it because it gets really expensive when you do need it and you can't get it. Heed this warning and take action tomorrow.

Double Click to Enlarge on your screen.

What we're watching?

Still watching the dollar, the $VIX and the S&P 500. Don't get lured into following the Dow otherwise known as the DJIA. This index is useless.

If you have money in the stock market you need to ask yourself if you are ready for a possible downturn that could be very very swift. If you are not then for goodness sake first thing tomorrow go and buy yourself some Puts against the SPY which is an ETF that tracks the S&P 500.

Take a look at the SPY Daily Chart shown up above. Notice the Red Circles. Folks I do believe we're headed down and you need to put on the raincoat and buy yourself some insurance. If you look at the second chart and again at the red circles the VIX is looking ominous and looks ready to break out of it's tight range it's been in for the past few months. Keep your eye on this for sure!

The Trade:
Buy the Nov 115 Put for 4.10 per contract.
For you cowboys that are a little more aggressive, buy the Nov 28 Calls for 2.20. This ETF has a daily return of 300% the inverse of the S&P 500. If the S&P 500 goes up 20 points this ETF will go up 60 points. Please remember this is a trading vehicle and not an investment and if you're a cowboy trader taming the wild west you know how these work and if you're not stick with the SPY put.

That's it for today.

DYOD and Happy Trading.

1 comment:

  1. Deleted last comment as it made know sense after I re-read what I typed.

    I recently moved most of my money in my 401k from cash into the S&P fund before we broke the 1130 level on the /ES or 113 level on the SPY. Since then we failed at 1150 a few times, which has caused me to go back into cash as of yesterday. I was looking for continuation to the upside but it feels like there will be an opportunity to get in at lower prices.

    From the energy side as of yesterday I am short Crude, RBOB, and HO via call spreads. This move feels toppy and ready for a selloff but I only want risk on in a defined manner.