Today’s drop in the markets was not unexpected. After writing up my market direction review last night my outlook was for stocks to turn lower. Monday’s market direction bounce up was more technical than a recovery. Investors are hoping that the Fed can keep the party alive by continuing with the quantitative easing which is now into its fifth year. With my outlook being for the market direction to move lower I basically watched for a break in the patterns of higher highs and then looked for the ultimate oscillator to signal that I should be buying Spy Put Options. Let’s take a look at today’s trade in Spy Put Options.
Spy Put Options Trade June 4 2013
I have marked the key aspects in the chart below:
A. The high for the day was 1646 around 10:33.
B. Following the high I waited to see if the market direction could push any higher. The next high was lower.
C. The high at point B was followed by another lower high at point C.
D. The first lower low of the day put the S&P 500 at $1638 which was below the opening low of 1639.
E. A higher low but at Point F a lower low which negated point E.
G and H. Lower lows again a clear signal that the market direction is having trouble.
I. I bought Spy Put Options at 12:38 and you can see the overbought signal from the Ultimate Oscillator at point J.
K. Another lower high and you can see at point L another overbought signal which I bought additional Spy Put Options for.
Spy Put Options Selling The Puts
The sell of the puts was fairly easy.
M. At point M the ultimate oscillator signaled oversold but you can see in the chart that each little rise was continually sold resulting in lower lows.
N. I sold too early and missed the last little plunge lower as I sold on the first oversold indicator from the Ultimate Oscillator, point O.
I have included the rate of change technical indicator because you can see that once the rate of change indicator turned lower it failed to recover throughout the downturn. Note though how after point M and the big drop in the rate of change, the rate of change then climbed back as seen at Point P. While it did not move back positive, the rate of change did indicate by climbing so quickly that investors were buying stocks.
Spy Put Options Trade Summary for June 4 2013
The trade on June 4 was almost “text-book”. I watched for the lower highs and lower lows and then bought my Spy Put Options on the overbought indication. I then stayed with the indication and bought another round of Spy Put Options at point K as the signal was still lower highs which told me to buy more Spy Put Options.
I hope other investors who were following the posts to my twitter account and the forum enjoyed some profits with this same trade.
Spy Put Options Internal Links
Review 2013 Spy Put Options Trades
Review 2012 Spy Put Options Trades
Review 2011 Spy Put Options Trades
Review 2010 Spy Put Options Trades
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