Well, I didn't expect the ride down to H.E.L.L., to begin quite this soon. I was hoping for post EX dates on AGNC and MTGE, for the ride to begin.
We should get announcement on MTGE this week, I would think. AGNC maybe the week following. The push should begin in earnest then for the 33+ on AGNC and the 24+ on MTGE.
In the meantime we need a relief rally on the broader market to buy some sweet SPY Dec140/120 Put spreads. Right now, with the depression in the SPY to 128 you can get them for just under 10.00. Steep!
That's why I say we need the rally to reduce them to about 7.50-8.00. The 8.00 places BE(break even) @ 132 @ Dec OPEX. I think we'll be @ 120 or less. 120 or below, gives you the max. return of 12.00, based on 8.00 cost.
One contract spread then would return $1200, 100 contracts, $120,000. The cost for 100 contracts is $80,000, which you can lose all of, if the PPS rises to 140 or better @ Dec OPEX.
There is great risk here, so be aware. I am planning on a number of contracts to add to the rest of my SPY Put spreads. I want a better entry. I think we will get it this week or next, as we are due for a relief rally when the buyers come in for the cheap stocks that sold off.
Its really a "sucker" rally , but don't tell them I said that. That's what it used to be called when a broader Bear market would rally with the hopeful Longs thinking they were getting stocks cheap.
They are cheap, but in relation to what?....not next month, nor the next month, nor the next...eventually they wake up and say words like "shoot" my portfolio is gone....yep, and its 2000 and 2008 all over again.
In the meantime I need these suckers, err, rally team, coming in to push the SPY back to 130+, then I'll buy!!
2 more points on the SPY(135) and I'm loading the boat with Dec140Puts Longs.
Then wait for 128-, again, and load the boat with Dec120Puts Short. A 20 point spread for 3-4 dollars. Sweet!!
Disclaimer: Options accompany great risk. In this spread I outlined you can lose up to your entire premium paid for the Long Puts, upon entering the Long leg, and then the entire premium, paid for the completed spread, upon entering the short leg.
If you did not understand the above paragraph, I would recommend that you do not enter this trade.
This is what I wanted. I am looking for a few more up days , with the crest at a 250-300 + up day. That will be a great time to leg in on Dec Long Puts(140+) on the SPY. Then, as we see 120-125 SPY days, leg in on the Short Dec Puts, 120 DecSPY's. In effect, you will have a 20 point spread, for a few dollars.
It's coming, C'mon SPY 135! This is a relief rally!
Doc, I like the thought process on this and with all the volatility of the European headlines, it seems you would have ample opportunity to leg into this position and increase position with every bad/good news dip/rip.
Thats a pretty big bet.
While I can totally see a crash coming,I am looking at charts of SPY and really I can go either way on this.
Since 3/9/09 we have successfully rallied for 6-11months and retreated for 1-3 months about 3 times. ( there was a deviation from that pattern April 2010.)
Last rally Oct 2011 till April 2 (my Birthday) 2012.
Now while I agree with you that this economy is in the crapper and it artificially being propped up by QE's, I can totally see SPY reversing and blasting past 140 as well.
Dont get me wrong I am not willing to bet on either. And I am by no means an expert. I am just putting my 2 pennies in.
One thing in your favor is that the spy crossed the 200 DMA.
Good luck to you my friend.
I am not spending a lot of coin, although some mornings I wake up with this impending sense of doom as I think I'm busted again. Once you go totally broke from your own stupid trades the boards(trading) are never quite the same.
Having said that I am exposed both ways. I am short the market, long volatility and Long the market on all of my short Puts. If we don't move from here, I win on everything.
The cool part is that I have been scary right on almost all of my predictions this year except EVEP first Q, and AGNC March deal with the EX change(who knew), and that's just it, who knows, BUT, adding up the bread crumbs that the brother and sister team left behind, it doesn't take a brain surgeon to make some pretty highly probable bets.
Those bets I have been proclaiming for months and plunked down about another 50k on options to prove, and that is, drum roll....AGNC 33+ and MTGE 24+ by their EX's. Its going to happen, unless Taleb's bomb goes off, and that's the "who knows" part.
I might not make it to the kitchen either b4 my heart goes out, but I'm still going to walk there to get my breakfast(can't miss that), and the other thing I don't want to miss, are my 50k of options turning into 100k+ @ these EX's.
Its going to happen,,,Keep the Faith!!
Onion, I have been looking at the exact same wave pattern and that is why I wrote here a few days ago that I see a 50% chance of the market sinking further. We have been in a "retracement" since April which could see the SPY go to 115 -- or could end any day.
So I see this as a time to be cautious and defensive until we actually see the bottom of this retracement.