VIX6 – SPX Trade #2
Good day Insiders,
Fake mentions of the China/US trade war going by the wayside is what propped the market up yesterday and now it’s as if there no reason to ever be concerned ever again. After having the greatest scares since 2008, bear markets is all everyone was talking about. Now, it’s as though there are no bears in sight. The market typically likes to do this, get everyone long and unexpectedly pull the rug. Is that what’s happening here? May not to that extent, though I am of the opinion that we are in for a high around the 21st. Now, we have had mentions that the markets are closed so what does that mean? Well, global markets are open and UK Prime Minister Theresa May is still in the hot seat. Trump and China, the government shut down and all the other concerns are their own beasts.
I will say, that everyone is saying that we keep rallying, and trending higher, and we are going back to new highs is certain support numbers aren’t breached. This very well could be true, however, I will say that just as talking heads on CNBC and those alike say “Nothing can down forever”, the same logic applies to a 13% rally.
The SPX has strong resistance at 2710 and seeing as how I am more bearish than bullish, we are going to place the following position and allow time decay to work in our favour over the 3 day weekend.
Risk & Reward
Selling the following call spread at 2715 uses $8,850 in margin. For those position sizing, it’s quick math. We have placed the trade with 10 contracts. Placing it with 2 will use $1,800, 4 will be $3,200 and so on. Provided the SPX stays below 2715 by the 25th, we will look to yield 13% ROC.