The SPY broke below the $365 level. I don't take that as a good news for the bulls. The VIX also increased further and the SKEW is on the rise.
Increased VIX = higher volatility. Normally a higher VIX means that we can expect a drop in the underlying but it's not necessarily the case. It just measures the volatility and not the direction.
Increased SKEW = higher risk of larger movement.
As options traders, we have to stay small and adjust whenever needed but keep in mind the possibility of a bounce back. We had 5 consecutive days of downwards move so I am expecting at least a small bounce sometime this week.
So what's my trade for today?
Despite being bearish I could not defeat my temptation to sell a put option against #XBI, which has been hammered in the last 2 weeks. It dropped from $88 to 75 (15%) and today it bounced back a bit. I was thinking of selling the $70 put but then settled with a lower risk trade (86% probability) at $65.
Trade Type: Short Put
Expiry: 21 Oct
IV Rank: 66
Cap Req: $654
Annualised Prof at Expiry: 160%
Today I did not close or roll any of my positions.
Let me know your thoughts.
Closed at $0.35 for an annualised profit of 1898%.