Thursday, May 23, 2013

Big Reversal Yesterday

Yesterday I started a new chart of the day series to record this epic move, which now looks like it may be a short lived series. We did however go on to make another all time high after my morning post yesterday. The new all time high put in on the S&P 500 via the /ES was 1,685.75...the day started out very well for the bulls until fear finally showed up in the market bringing with it close to a 40 point reversal on the day:

Before we made any new highs on the session this morning I went ahead and sold a 1,610 put for 20 points against my much publicized short /ES position. I also bought in my short 1,555 put for a small gain as I continue to believe and operate that staying small with no more than one contract of exposure the prudent thing to do in this trade. My new effective short price as of the close yesterday is 1,635 and my aggregated position looks like a giant short call spread:

Looking at the risk profile above you will notice that I have hedged off my risk at the 1,700 level via a long call. Additionally although I sold the 1,610 put I do own a 1,600 put that keeps me positioned well to profit for an accelerated move to the downside. And just for the record if I were to sell out my long call and put, my effective short position would be around 1,640, but that would also expose me to unlimited upside and downside risk.

To date I have collected a total of 80 points over 26 trades. And as I write this the market is about 100 points off where I got short around 1,555.

Good Luck Trading!

In The Money Trades

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