The Market has retraced about 7% from the January high. I would expect around 10% or more and a test of the 200 DMA before this is over. But of course the Market loves to fool the most people, which is why we prefer to trade non-directional income spreads. With these spreads we don't have to worry which way the Market will go, we only have to know how we will adjust the trade if the Market starts to trend.
Our "window of opportunity" is beginning to open up and it's time to initiate our March position. We are in a Market Structure Stage 3 on the Daily Chart, and a Stage 1 consolidation occurring on the 30m Chart. The VIX is elevated so we need to combine spreads to reduce our Vega risk. So we'll use a "CalenFly" Spread to cover the trading range between the 103 and 111 strikes:
Open - 4 Apr/Mar 105 SPY Put Calendars for about $1.00
Open - 2 Mar 107/111/115 SPY Call Butterflys for about $1.00
Hedge the Position
Open - 1 Mar 96 SPY Put at about $0.60 (1 covers all 6 Spreads)
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