Just when it looked like markets are finally going to settle into an uptrend, we get this crash. Down over 2% in the last 24 hours and we’re right back testing that ol’ 200-day moving average.
Our Balanced strategy has picked up some gains being in Bonds and our Volatility strategies are both in cash so we’ll just stay put on the sidelines there and avoid this ugliness.
So today is all about our SPY Bull Put Spread within the VTS Discretionary Strategy. The original April 26th article about this trade (which is here) was to set our stop-loss at a closing price below the 200-day moving average. That will signal that the original trade thesis is broken and it’s time to get out. We’re below that right now so it’s crunch time.
However with only 15 days left until expiry, we can’t afford to hold this trade much longer. There is always that trade off between Theta decay and Gamma risk and I never hold options too close to expiry. It’s far safer in the long-run to keep a distance away from options expiry and just reload the trades further out in time.
Even if we did hold the trade through today and see where markets settle, I already know for sure we won’t be holding this trade through the weekend so letting it go one more day would just be hoping that markets recover. And we don’t trade based on hope. We trade based on math and probability. This trade represents a very small allocation so either way it’s not going to impact the Total Portfolio very much at all, but the right call is closing it for a small loss and looking for better entry points. With markets where they are at right now there’s actually plenty of option trading opportunity out there.
Patience, variety, proper position sizing, and never getting married to any individual trade are keys to long term option trading success.
Current VTS Total Portfolio Solution Allocations
10% VTS Conservative Vol Strategy – Optional replacement for lower risk tolerance investors
10% VTS Aggressive Vol Strategy – Optional replacement for higher risk tolerance investors
Temporarily paused: VTS Tactical Volatility Strategy
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