SPY PUT – Hedge Trade

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Today I again I moved back to the SPY Put hedge and purchased SPY Puts. First I purchased September 121 puts at the open as the market raced higher on the unemployment news.

This though was short lived and shortly after noon the market hit a new intraday low and I sold the first lot.

Towards’s the day’s close I picked up a second lot of SPY Puts. Again I picked the Sept 17 121 Spy Put.



 

SPY PUT Chart For August 5 2011
S&P500 -0.69 – 1199.38
Most Recent High – May 2 2011 – 1370.58
S&P500 down 12.49% from May 2 High

Below is today’s chart. My comments are below it.

SPY PUT - August 5 2011

At the open I purchased my SPY Puts on the news of the unemployment. I was pretty confident that the market would rally at the open and then sell off. I did not think it would sell as far as it did. The SPY Puts almost doubled at one point! I sold them a little late but the Ultimate Oscillator did not show any oversold condition so I was selling them blind as it were.

So I added the momentum chart to my tools and it showed a rapid decline in the selling. I sold at that time. However as the day progressed momentum fell away BUT the ultimate oscillator flashed another overbought indicator for a few minutes near the close. I decided to buy 20 more SPY Puts to the end the day and hold over the weekend.

As I am pretty convinced this is a bear market I was not concerned about holding them over the weekend. With the run back up in the markets toward the close I figured even if the market moved somewhat higher on Monday, there is no way this market is going to run away. This is a bear market now and that means the SPY Puts will work out, if not Monday then probably Tuesday.

You can read the SPY PUT trades for 2011 here.  Today’s earnings were excellent and almost matched those of Thursday’s big sell off. Meanwhile the overall earnings on the SPY Puts is now at $40,000 which is getting close to last year’s $65,000. Remember that last year the market sold off almost 25% from its high, while this market is down a little more than 10% so there is plenty of room for the market to move lower.

I believe the SPY Put is the best way for me to continue to hedge my US Portfolio.