Kudos to MMs

What to do with our hedged position if this continues to sell off? Good question aye? Should we let go our short calls if this goes back to 1320 and get long again at support? I think it is best to see how this goes before deciding. It is always worth having a strategy for the "first" time a market goes to a support/resistance after an extended move. But if it goes there again, it is best to be as dynamic as possible, imo. The easiest (probability wise) trade is always the first pullback, although it is the scariest. Always found that fascinating.

Instinct says this selloff is "normal" action on Opts ex, not anything to worry about...."FV" is still strong, and that continues to be our "Lighthouse" of direction.
 
ESM1 at 1316 which puts SPX at about 1319, or close enough to support to warrant thinking about going long again. IMO we should wait to see how the day progresses, although daytraders could easily go long for a small pop. Swing traders playing this system would be better off holding off until 1300, but let's see how the day develops.

"FV" has collapsed a bit to 1446. Even though still strong, that plus the inverted parameter, is the nature of my caution.
 
Support has been cleanly broken on the open. I say patience. Odds that we go to 1300 ish is very high at this point.

Pick a spot to go long near 1300. It doesn't matter how close you are to 1300, only that you are comfortable with the risk if it goes lower. I would use 1302 ish as my entry point. Use a 50 delta call option, and leave it un-hedged. If we go long ATM near 1300, then if we break 1296, sell (ratioed) 1340 or 1350 call options (resistance) against the ATM long call and complete the spread to hedge and wait to get long again near 1272. But I doubt this last scenario (break 1296) plays out. Others more conservative, will get long only on a crossover of 1300 ish from below. This is more cautious and more risk averse, but there is a risk of missing getting in if it doesn't goes below 1300 on this wave. Fear vs Greed. I am in the greed camp with such strong FV. If FV was just a bit higher instead of being way higher like it is, I would opt for the more cautious scenario.

It could easily go lower from 1300, and we want to have dry powder to get more long if this turns into panic.

Note that we are trading with a long bias, which is only justified by a strong "FV".
 
High probability that we get close to 1300 SPX today. Taking action is recommended as explained above if this occurs. "FV" stands at ~1450. On the other hand, parameter remains inverted.
 
Quote from shortie:

does the model spit out ETA of 1450 or is it the exact value quite abstract ("higher than now = Buy")?
More...
The model "FV" is a number that it thinks SPX should be that instant. However, I have noticed that there are dynamic phase lags, meaning that the market lags the model, days, and often by a week or two.

I still don't quite understand the speed of the lag, or why the market tends to lag the model, although I have a very good idea as to where it comes from.
 
Is 1315 becoming some sort of minor support? I don't know, but it has bounced around there a few times now, and with some ferocity. Don't know what is right here. Should we have fear and wait to get long at a more secure level, or should we be greedy and get long ASAP?

"FV" is telling us that being greedy to the long side because the downside is limited. I don't know, there is no logic in getting long at 1315, but perhaps there is at 1310. 1302 may just be too conservative...
 
The back and forth here is pretty vicious on the swing trading time frame of days to weeks. Selling resistance has been golden, but buying support has been hard because the market hasn't given any layups as of now. This makes perfect sense, since the bias is still strongly higher. Still, this may be the hair that breaks the camels back to 1302 ish, where our patience will be rewarded with action described above. On the other hand, 1315 has to be watched now as some sort of weird support level, because it has bounced from there several times. I doubt it holds this time though.

Hard to say, but one must maintain a certain level of discipline, otherwise eventually emotions will rule your destiny (Yes obe won kenobe ) :D
 
You must log in or register to reply here.
Back
Top