Friday, November 12, 2010

Bookkeeping: Selling 25% of SPY Puts as S&P 500 Nears 20 Day Moving Average

Finally some "fun" in the market - I know for most "straight up to the moon" is fun, but not for my style.

Of the SPY puts I brought on this morning, I am selling one quarter as the S&P 500 approaches my first goal at S&P 1196 (it is one point away) - this is the 20 day moving average.  This will generate a 25%ish profit on about 1.25% of the portfolio, helping me hedge off losses from the long side of the portfolio.

The stretch goal for the day is the 200 week simple moving average at 1192.

I'd be a bit surprised if we break right through the 20 day - but happy to accept it.   If the market goes to 1192 I'll sell the remaining puts and then re-assess.  A CLOSE below 1192 is the 'directional changer' for me i.e. all long positions need to be re-assessed, some positions exited or lightened, start finding individual equity positions to build up a short portfolio, create longer term index short positions, and the like.  But we're not there yet.

I'm not interested in making any dramatic moves as 1192 is a huge level for the market in my eyes.  For now I want to make some gains with short term index shorts, to offset the long exposure and then see how things develop.

In terms of 'stop limit' of my puts, instead of S&P 1205 that I had earlier today, now that I have nice profits I'll move it down at least a few points closer to 1200 to lock in material gains.   Either way I will be selling some of the puts by the end of the day to avoid weekend risk and potential nonsense monday morning in premarket.  I'll edit this piece this afternoon with further moves on this position.

EDIT 1:05 PM - S&P 500 is down to 1194 level, so I am letting go another 25% of position go, leaving me with half on.  This batch has a gain of about 35%.  I'm moving my limit stop on the remaining half down to just over 1197 so I lock in profits on any bounce.  

EDIT 2:50 PM - sold the rest of this position on the move over 1198.

Right now our window has changed from 13 day moving average (1204) as the floor to S&P 1225 as the ceiling, to 20 day moving average as the floor and 13 day moving average as the ceiling (1196 to 1204).  And so on and so forth if we can break through 1196...

This is the first day bulls have felt trapped since late August.

Long SPY Puts in fund; no personal position


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