47% Return With Second SPY PUT Options Trade for Oct 7 2014

Oct 7, 2014 | Profit And Income Strategies, SPY ETF Hedge Strategy (SPY)

In this morning’s Spy Put Trade I indicated I felt a second trade would probably be entered shortly after the first. This is fairly common in volatile markets. In my article last week on 12 Strategy Changes For Profiting in Volatile markets I indicated that one of the twelve strategy changes was more use of the SPY PUT options. Today I entered and exited from two trades.

The purpose of the spy put option is to build up a cash cushion which over time helps protect my portfolio against a large loss in the event of a significant decline. It is not uncommon to trade the spy put option and create a cash cushion of 10% of the value of my portfolio which protects against a 10% decline. Of a portfolio of 1.25 million, which is what I am currently using, I would need a cash cushion of $125,000 to hedge against a decline of 10% of the entire portfolio value. Since I primarily sell puts and because I also am trading in the market direction portfolio as well as the Trading For Pennies Strategy, usually a large decline actually ends up earning significant returns so while my spy put options trades may earn 10% of the entire portfolio for the year, the other strategies in use are also earning significant returns as well, all of which works towards protecting the entire portfolio in steep declines. For example, this year the market direction portfolio has earned $190,000. That in itself can protect against a 15.2% decline of the entire 1.25 million portfolio.

When combined with all the other strategies, including rolling down covered calls, selling options both calls and puts and all the Trading For Pennies Strategy trades and Spy Put Options trades, the returns can easily protect against a full 25% correction.

Here is the second Spy Put Trade for today. You can see in the trade that there were a number of possible entry and exit points for investors to have considered and done according to the strategy, there would have been no losses with any of the entry and exit points today.

Second SPY PUT Trade Alert for Oct 7 2014

This FullyInformed USA Members Strategy Analysis of the SPY PUT Strategy trade can be directly accessed through this link or USA Members can login here. Non-members can join here or read about the benefits of a membership.

Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.