The SPY movement in the last 2 weeks: down 8.2%.
The QQQ movement in the same period: down 12.4%.
These are big moves but I would not panic. If we look at the SPY daily chart then we can see that we entered a nice channel in early May and are currently about 1/3 of the bottom of the channel. If we break below the roughly $363 mark then I would certainly look to re-balance my portfolio. At the moment most of my positions are bullish given the tape action in the last 2 weeks.
For those, who are new to my daily market comments, I place and document one trade a day with the objective of helping everyone learn how to trade options.
What's my trade for today?
#LUV (#SouthwesternAirlines). Due to the bad weather in the US there were a lot of cancellations, which affected the airlines. But to me it's not a justification for the 19.3% drop in 2 weeks. I am confident that it's a typical scenario where the market overreacts and it creates options sellers opportunities. Also worth noting (bottom part of the chart below) that the volatility jumped to 46 so the premiums are really healthy.
Trade Type: Short Put
Expiry: 20 Jan
IV Rank: 45
Cap Req: $422
Annualised Prof at Expiration: 214%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
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Let me know what you think.
Closed at $0.16 for an annualised profit of 507%.