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Saturday, December 3, 2011

Weekend Thoughts

Hello folks,
No blogging for me in the last two weeks. But really I hadn't seen more opportunities to open positions. In fact the two positions opened in my paper trading account look really nice facing expiration in two weeks. The SPX Bull Put Spread (1105/1100) looks really good with SPX currently at 1244.28. The RUT Bull Put Spread (620/610) is also in really good shape with RUT currently sitting at 735.02

I really didn't want to increase the portfolio risk on the downside. With two positions already open, betting for a bull movement. The third candidate for December expiration would be a Credit Call spread and this week was really good to open one with all the upside volatility that there was. But, I wasn't in town. I was in Montreal for work, so I missed it. Now let's see how things are in the S&P500:


(Click on image to enlarge)
The market is not overbought yet, although it is getting close. Furthermore, there are some minor layers of resistance between 1265 and 1295. Frankly, if you ask me (and remember I'm a nobody) I think there is still some room for upside movement, the problem is that December expiration is right there 13 days from today and the time premiums for selling calls is already very low. So, I don't know if it is worth it. In any case, chances are if the market keeps moving up and enters overbought territory I will be trying to sell some calls in the 1325 - 1350 area, but using January expiration.

Now looking at the VIX:

(Click on image to enlarge)
Seems to be getting oversold. A move up in the VIX would result in the Market overall being close to a ceiling in the upside. Bottom line for me is, if the market keeps going up I will probably paper trade a Credit Call spread betting for an imminent downside move, if the market starts going down next week I will probably do nothing until we reach oversold territory or overbought again.


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