SPY PUT Options Held Overnight Can End With Unexpected Losses

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Today’s market direction stayed positive and tried hard to rally. But this was to be expected after such a heavy down day on Monday and I was waiting to purchase spy put options to hedge my portfolio going into Wednesday and Thursday.

My market timing analysis from Monday after the markets closed showed the possibility of a rally and then once again more selling. That meant a rally for Tuesday which is what happened today and then more selling into the rest of the week.


With my market timing analysis in mind I watched for a strong overbought indication in the Ultimate Oscillator all day to buy spy put options.

You can see in the chart below there were two overbought signals but neither were extreme. As the market was climbing and as I needed to purchase as high as possible, it was prudent to wait for an extreme overbought reading.

I got the reading around 2:30. I missed the top but purchased my spy put options as the S&P pulled back.

The chart below shows the day’s activities. You can see how much more extreme the Ultimate Oscillator overbought reading was when I purchased my spy put options than at any other time during today.

Spy Put Options Bought

SPY PUT Options Could Be A Wrong Trade

Despite my market timing analysis indicating that selling will continue in stocks after today, there is always room for error. Something positive could come out of Europe or an economic report on Wednesday could surprise to the upside.

That is the chance taken when buying spy put options to hold overnight. I prefer to buy my spy put options when the market direction is already moving lower. I then wait for a bounce and buy to profit as the market continues moving lower during the day.

But buying spy put options a day in advance has distinct advantages including a better chance of a larger profit should the market gap down at the open.

The spy put options trade is my method of hedging and with today’s rise in the market I bought at a prime moment which hedges my portfolio fairly well for Wednesday’s market.

If the market turns up and shows strength I can always sell my spy put options for a small loss since I have built up a consider cash cushion already.