Monday, May 24, 2010

Update: TZA trade

Today I purchased the Oct. Expiration Put at a Strike Price of $6.00 for $1.12 average price. That was the same price as the closing price on Friday. I may add to my position if the market drops again tomorrow and I will try to get more cheaper, hopefully at $1.08.

I plan to sell these when the Dow returns to 10,600 more or less. I still retain 1/2 of my Call Options for Oct. expiration. They went up in price today.

If you look at the Intraday chart of the Dow below, you can see just before the final drop, a "W pattern formed with a slant to the downside. You can also see where I underlined the first "W" pattern and that the slope pointed up. That is why the Dow went up and then after the second "W" pattern went down near the close. Tomorrow is another day.

The VIX closed at 38.32, down 4.4% after being as low as 35.57, or down 9% today. So if the VIX is an indicator of tomorrow, the market should go up tomorrow. Increased Volatility would suggest a more pronounced drop, but I am betting that we will have a short relief rally over any spec of good news. Watch for it on the TV shows. They like to attribute something to when the market goes up, even if they are pulling stories with a positive spin out of their butt.

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