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Thursday, November 19, 2015

Long March 2016 SPY Puts

Today I initiated the first position of 2016:

Buy 6 SPY 161 March Put @0.80
Debit: $480

Wait a minute? Isn't this a site about option premium selling? What the hell is this long Put so far out? This LT guy just wants to throw money in the air. He's burning his dead presidents just like that.

Well, with a $100,000 portfolio it is a totally different ball game folks. A 10% draw-down on a 10K account doesn't hurt as much as a 10% draw-down on a $100,000 account. Remember, in the end, we go to the grocery store with dollars, not percentage points. So, absolute dollar numbers do matter. A lot.

Today's play is not a speculative isolated position betting on an unlikely market crash. It is the foundation for a series of plays to come that will be protected from a severe market correction. It will provide us with the so much needed peace of mind that becomes necessary when managing much larger amounts of money. These long Puts have a lot of potential without the market getting even close to SPY 161. A simple 2 or 3% fall, with the accompanying volatility expansion would be enough. More importantly, this initial defensive play will allow us to aggressively sell SPX Put spreads in the historically strongest period of the year (Nov - Jan).


I see,....a defensive play while there is still nothing on to defend

That's right. It's like starting a chess match with a Knight move rather than a traditional Pawn move. But it makes a hell of a lot of sense.

Tomorrow is November expiration and in all likelihood I will be deploying the first Iron Condor of 2016.

Market close for future reference:
(Click on image to enlarge)

Trade Update:
This position was closed on December 11, 2015 for a +27.5% return on investment

If you want to learn how to buy Portfolio Insurance effectively: which strike prices to select, how many contracts, how many days out, and how to manage this insurance over time, consider acquiring LTOptions, my options trading system revealed to the last detail.

Check out 2016 Track Record


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