SPY PUT Trade With Ultimate Oscillator And Instincts

SPY PUT trade is always my hedge. It has been this way since the SPY PUT was introduced back in 1993. Prior to that I always had a lot of work protecting my portfolio through a combination of put option purchases. When the SPY ETF was introduced it changed my investment style and my portfolio for good. You can read more about the SPY through this SPY PUT Link which takes you to the State Street Global Advisors SPY ETF home page. Once the SPY ETF was introduced options became available and I was able to buy and sell puts and calls against the SPY ETF. This became my SPY PUT Trade to hedge my portfolio. It was a simple method that combined the Ultimate Oscillator and my market timing tools to pick the best moment to buy my spy put contracts and the best time to sell the spy put contracts. Normally I try to stay no longer than a day or two.

Today was an excellent example of the SPY PUT back in action. My last SPY PUT Trade was on April 16. Today’s trade was again pretty simple. I had sent out a market timing notice after the market closed yesterday that I believed the market direction was going to turn down. I think even if the US unemployment news had been better the market would at best treaded water. All the signs of a market pullback were in place and in my market timing column yesterday I showed why I believe the market direction was down. This is the time for the SPY PUT trade or hedge to be used.

SPY PUT TRADE

I was too slow to get going in the morning and missed two great chances to buy earlier. I have marked those on the chart. I bought on the third opportunity at 10:30 am. The Ultimate Oscillator market timing indicator was flashing overbought so the typical overbought signal was present when I bought my spy puts.

SPY PUT Trade for May 4 2012

My morning SPY PUT Trade for May 4 2012

SPY PUT Rallies Faded

From the open there were a number of SPY PUT rally attempts. These probably were caused more by traders than anything else as the mood was glum. Every rally attempt saw lower highs being made. This is classic and I decided to use my instincts rather than the Ultimate Oscillator at this point. You can see in the chart below there were successive rallies. By noon the rally attempts stopped and the S&P500 market direction changed from moving lower to sideways.

With the SPY trending sideways and the Ultimate Oscillator market timing indicators flashing a solid oversold, I sold my SPY PUT contracts. This ended my trade.

Spy Put Rally Attempts All Failed

Spy Put Rally Attempts All Failed And Resulted In Lower Highs

SPY PUT Morning Trade Summary

I am writing this around 1:00 PM so I do not know what will occur in the afternoon. Often in a trade it is valuable to rely on your instincts rather than only the market timing technical tools like the Ultimate Oscillator. You can see in the charts there were numerous oversold indicators in the Ultimate Oscillator but instincts from years of investing told me that with each rally ending with lower highs, there was no need to rush. It would be best to wait until the market direction moved from down to sideways. When this happened then one quick look at the oversold condition of the Ultimate Oscillator told me it was time to sell my SPY PUT contracts.

I am hoping for another rally attempt only bigger and a chance to buy more SPY PUTS to sell them at the close. I expect a typical afternoon rally attempt, then selling to the low near the close. I would not hold spy puts over the weekend so any spy put contracts I own at the close I will sell even if there is a loss.

SPY PUT OPTION LINKS

Internal References
Listing Of SPY PUT Trade Articles

2012 SPY PUT Trades Listing

2011 SPY PUT Trades Listing

2010 SPY PUT Trades Listing

Articles Discussing The Ultimate Oscillator

Understanding SPY PUT Hedge Strategy Part 1
(When I Can Watch The Market During The Day)
Understanding SPY PUT Hedge Strategy Part 2
(When I Am Unable To Watch The Market)
Understanding SPY PUT Hedge Strategy Part 3
(Short version using only ultimate oscillator)

 External References
SPY PUT Option Chain
SPY ETF Home Page From State Street Global Advisors (SPDR)

  • Mike Loewenthal

    Hi Teddi,
    can you please clarify what time frame you are using for your entry and exit signals on this trade and or in general when your are buying SPY Puts for a short trade like this.
    Thank you
    Mike Loewenthal
    mlace123@yahoo.com

  • Mike,
    Normally I use the 1 minute time frame.