Another Whipsaw Wednesday…

Well, I expected them to take it back up (as I said yesterday)… but not all in one day!  I stated yesterday that I thought we might go sideways to slightly up, gaining 2-3 points each day, and recapture about half of the down move that occurred on Tuesday.  I really didn’t expect them to recover all the move… sheesh, don’t these bulls have any compassion for the poor little bears?

Surprisingly (not) the volume was light with only 109 million shares traded on the SPY (doesn’t include after hours).  Which means that they can easily move the market in any direction the choose… which is UP of course.  I can only assume that the larger then expected move was propelled by short covering, as a lot of bears were expecting more downside.

I, on the other hand, expected some upside… just not so much, so quick!  And yesterday, because I expected today to go up, I sold my USO 40 puts at 39.72.  I had thought that they would go down to gap fill at 39.35… at which point I was going to get out.  When it didn’t happen, I sold at the end of the day, thinking that oil (USO) would go up with the market the next day.  It didn’t… In fact, it continued on down to close at 39.21.

Well, you can’t win them all!  I would’ve had a nice profit on that trade, but instead took a small loss.  I made the mistake of not following my own advice.  I was very confident that it would hit at least the gap fill at 39.85, and possibly hit the 38.85 level.  I was going to bail at the first support, as it is too close to option expiration to wait on the lower support level.

Ahhh well… we live and learn (sometimes)!

Ok, since today was such a huge up day, and the fact that there is a lot of overhead resistance… I did go short today at the close (not much though).  I got a spy 115 jan. put spread, selling the 113 put.  Net cost was 62 cents.  I’m expecting the SPY to close out this Friday at 114.00 (or possibly 113.00).  Since I have a 115 put, if it closes at 114.00, then the 115 put will be worth $1.00, and the 113 I sold will expire worthless.

Not a bad return for only 62 cents (per option spread) risked.  Of course if it goes to 113.00 even, then I’ll make $2.00 on the 115 put I bought and the 113 put I sold will again expire worthless.  That would be the ideal place to close, but you never know with this market?

Regardless… I’m expecting more downside next week.

Red

Edit… This just in, the reason for the huge up day is explained here….

http://www.zerohedge.com/article/esh0-volume-spike-explained-fat-finger-results-2-point-jump-market

Waiting On JPM?

Related posts:

1. Wildcard day Wednesday…
2. Whipsaw Galore…