Editors Note:

I am growing increasingly concerned we could see a volatility event in August. I could be just a nervous Nellie but when things are going so well, it is sometimes worthwhile to take out some insurance.


No New Bullish Plays


SPY - S&P-500 ETF - ETF Profile

• The SPDR S&P 500 ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index (the "Index") The S&P 500 Index is a diversified large cap U.S. index that holds companies across all eleven GICS sectors.

The S&P is marching slowly towards a date with destiny and 2,500. Since the median estimate by the top 16 analysts was a 2,450 yearend price target on the S&P, the arrival at 2,500 could be a tripwire that triggers an August correction. We have not had a 5% drop in a year and it has been 9 months since a 3.5% decline. With earnings rapidly playing out and most of the high profile companies will finish reporting by next Wednesday, I am going to recommend a bearish position for August/September.

I am going to set an entry trigger for a SPY put with the S&P at 2,495. Since aggressive traders normally want to anticipate a particular number, I want to enter the position just before we reach that level.

With a S&P trade at 2,495:

Buy Oct $245 put, estimates premium $3.00, initial stop loss 2,510 on S&P.