Week Ending May 26th, 2012

Wow, this was a roller coaster week.  The week opened up positive on some easing of uncertainty from the EU and JPM, but there is still a lot of uncertainty in the market.  This is evident with the VIX popping up as well as puts out-pricing calls on the SPY.  There was even rumors of a large hedge in the SPY with over 200,000 contracts traded at the 95, 105 and 115 calls.  Someone is taking some strong insurance against a market down turn.  This week we actually ended up from the opening about 1.5%, which is good given how bad the past month has been.  The jobs report was mixed and as a result thursday and friday were pretty stagnant.  That’s probably more a result of the long weekend and the market closure on Monday due to Memorial Day.  The overall sentiment on this market is not positive though.  The question remains is it worth getting into some long positions?  I’m a little leary and since we’re not playing with a lot of cash here, I play mostly through options on positions that I feel good about.  I think that we have a lot uncertainty baked into the prices already, but ultimately we need to fall more.  There is so much instability in the global markets, that you can’t imagine this not affecting the small and large caps.  As a result I attempted to put an order in this week, with the expectation that we remain slightly stagnant or push back.  Even if the bulls come in to buy a little, I imagine that they’ll reach strong resistance.  There are a lot of sellers out there!

The attempted order was:

Buy 5 SPY June 16 ’12 135 Call
Sell 5 SPY June 16 ’12 133 Call

I wanted 0.95 per pair of contract.  This trade would have yielded about 100% if I was right, and this was when the SPY was trading at $132.4.  These contracts take maximum value if the SPY closes below 133 on June 16th (at the close) and are complete losers about $135.  Unfortunately the afternoon hit and we dove back down to $132 and my orders never filled.  Oh well, we’ll see tuesday how I would’ve done.  Happy Distractions!


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