Wednesday, March 17, 2010

Bookkeeping: Selling Half of Index Positions as S&P 500 Runs to 1170

I am selling half of both the TNA ETF and SPY April 116 calls I bought yesterday morning [Here We Go] as the S&P reaches my target of 1170. (just below)

I was hoping to catch a "16" point move on the downside this 4 week period if S&P 1140 was broken Monday (target downside 1124).  Instead I caught a "16" point move to the upside as we entered over 1154 and now we have 1170(ish). 

The 2nd half of both positions will be sold on a break below 1165 so I can preserve profits (less profits than this half of the trade, but still very nice ones).  If 1170 is breached to the upside I'll let the other half run as the house's money.

I was more aggressive than usual on my allocations this time around
  1. TNA ETF I went in with a 13% allocation, 6.5% of which is being sold now.  I caught roughly a 4.5% gain in about 1.25 of a session.
  2. SPY April  116 calls with a 9% allocation, 4.5% of which is being sold now.  I should have about a 35% gain on those in 1.25 sessions.

Again to repeat, if S&P 1165 is broken to the downside - I sell the rest, no questions asked.  If 1170 is broken to the upside I will carry the rest and just play it by ear.  These index plays are just made to amplify our returns in very short bursts so I've been waiting for one of these moves that I could correctly catch for about 4 weeks.  I could be greedy and keep the whole batch of index positions and hope for S&P 1180, 1200, heck 1250 at this pace, but the idea here is to rent our cash for very short periods of time and make our return, and get back our money.  This reduces risk; it's not about squeezing every last dime - it's about squeezing as many dimes as possible with as little exposure as possible to the market. 

p.s. S&P 1078 gap still remains... from here that is 92 S&P points down or nearly 8%.  I can't wait to make hay on that trade.  The higher we go from here, the bigger than trade will be; if we only catch half of it with puts it will be huge.  April or May 2010.

Long both names mentioned in fund; no personal position


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