Yesterday I was looking for the S&P to stay range bound in the 1265-1292 zone. It may seem strange after a 22 point decline in the S&P, but it only got 4 points or so under the bottom end. Overnight futures action did not hit a new low. Jobless claims could bring some near-term volatility at 8:30 EST, but there may be a long set up in play. So I'll be looking for a way to position for the upper end of the range with SPY or OEX calls.
All in all it feels like a good decision to have waited for a better spot, but that does not mean I'll be correct.
The 200 day moving average currently sits just lower at 1256.81. A 161.8% Fib target is just below at roughly 1248. The market can obviously do whatever it wants, but with Quadruple Witching tomorrow, betting on an upside surprise with beaten-down call options is about as low risk as you're going to get.
The flip side is that Greece unravels quickly and causes European banks to suddenly choke up just like the day of the flash crash. Note that this morning, Spanish bonds slumped after missing their sales target -- yields rose to find buyers that weren't there at lower yields. The yield on Spain’s benchmark 10-year bond surged to 5.72 percent, the most in a decade.
I must say the VIX supports this flip side. It finally broke above 20 yesterday and closed near its highs. A breakdown today could have a cascade effect lower with a commensurate spike in the VIX much higher. Another reason why I like options in these environments.
I woke up early this morning for some reason and was able to get out of the 6S hedge against my $USDCHF position for a 200 pip profit after taking some heat yesterday trying to press it.
No comments:
Post a Comment