Yesterday's Couch Potato published a trade alert and opined ".... The S&P 500 appears to be starting to settle into a near term trading range to relieve the extremely overbought condition generated by the aggressive bullish move that started year off..."
As evidenced in the SPY ETF 5 min. chart below the S&P 500 index opened flat and started gapping down hard after the first hour of trading. We used the 5 min. chart to identify an intraday bottom and executed several of the published trades around 10:45 EST. The SPY dropped even lower about an hour later but after the chart displayed a bullish candlestick we initiated the trade to avoid the risk of prices filling the gap. As you can see the price gradually recovered as the trading day progressed.
SPY Position Update -----------------------------------------------------------------
SPY closed at $150.96 on Thursday
One of the trading rules cited in yesterday's trade alert "... If prices gap down tomorrow we should be able to close out the February 15th expiration call spread at a lower price. If the call spread associated with the February 22nd expiration iron condor is not available as published we will probably hold off on that part of the trade until the price recovers..." As previously mentioned, the SPY price pulled back sharply in early morning and we were able to close out the February call spread as displayed below.
Another part of the trading rule said "...If the call spread associated with the February 22nd expiration iron condor is not available as published we will probably hold off on that part of the trade until the price recovers...." We are CANCELLING the published February call spread adjustment as we look to set up March SPY trades.
Another trading rule we stated "... if prices drop sharply then we will probably initiate the put spread at a lower strike prices...." When the SPY price dropped in early morning we opened the February 22nd put spread below.
Today's S&P 500 index price action provided an opportunity to possibly recover most of the loss on our SPY position by closing out the call spread and opening a February 22nd put spread. We may have accomplished our loss mitigation objective, therefore no need to accept the risk from another February call spread.
Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.