Good morning folks,
I am placing a bid on the June RUT 740/750 credit call spreads at .75 to book a profit on the balance of my position and then I will sit on the sidelines. We were short a majority of these from 4.35.
Once we see a pause in this decline then I will look at credit put spreads but seriously I just cant do it now. Options are all over the place and the risks don’t seem to justify the rewards.
For stock options traders: when or if the market tests the lows or that 1078-1085 area, if you are considering going long stock it might be a prudent idea to look (explore) at selling deep out of the money puts instead. You would then collect premium and if we continue lower into an abyss, then you would be called on that stock at a lower price.
Remember you must be ready to accept being called on that stock with cash on hand. It is in this type of trading environment that selling deep out of the money Put options can be effective. The danger is being over leveraged, so only sell options to collect premium on the amount of stock you would buy outright, not on margin!
FYI: In times of inreased insane volatility (like now) reduce your leverage. In futures start looking at the MICRO contracts in the Currencies. The CME has excellent liquidity and transparency. You can do several small contracts rather than one big contract.That will allow you to scale out of trades and trail stops. As for other markets check out the grains, seasonally we are in a strong period. for Soybeans, and they are holding value near the 950 level bases July, and you can also trade mini contracts on the grains such as Wheat, Corn and Beans.
As always, remember if the risks are not worth the reward, then don't do the trade. But if you think there is a good opportunity for a trade, in times of increased volatility just decrease your leverage so you dont have an over exposed risk factor.
All the best,
John Person
Past performance is not necessarily indicative of future performance. This report includes information from sources believed to be reliable but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report cannot be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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