SPY $171 Weekly Put P/L

This was meant as a position to fade the SPY's early strength intraday, I'd never go for a weekly expiration for a position I intended to hold longer and as most of you know, I want to get out of an option position as soon as momentum starts to die, *I can always re-enter the position later. The less time spent in an option, the better as far as I'm concerned.

I was not watching the SPY closely because I have responsibilities to everyone, not a single position so I missed the most opportune time to exit.

I'm going to show you some of the tools I used to make my decision and you may find them useful, remember these can be used in any timeframe for any kind of trade.


First the P/L which was not as good as it could have been.

The gain could have been over 20%, instead it came in  at just over 12%, momentum really counts.

 First, I said, "Don't read too much in to this", there wasn't anything reversing or going the other way in the SPY.

It doesn't often work out this way, but I think planning your trade and trading your plan are important, I always want to take as much as the market is giving, but for the way the position was structured, I should have closed it earlier.

The NYSE TICK data is such a simple tool that so many people don't use and it is useful. As you see the TICK's trend changed, that's a change in character meaning a change in trend is likely (even though we are only talking about 1 min intraday-it was the timeframe the position was set up for).

 This is the general momentum screen I use, in the top window with price is a simple "Momentum" indicator, then RSI 6 (I don't want to use what every one else uses because I don't want to see the same thing, there's no edge there). I usually use longer periods, but Wilder's RSI (Not to be confused with the Relative Strength) does not respond well in longer timeframes.

Next is a simple MACD Histogram, the periods are 26/52/9 so they are longer than usual, sometimes I'll use 52/104/9.

Then a normal Stochastics, but this is period 50, sometimes I use 100 period rather than 12 or 14.

All indicators are used as divergence indications, not their more typical applications.

 Again, a VERY SIMPLE momentum indicator that no one uses because it's "old"; Rate Of Change. If you are using Worden software you can't apply ROC directly to price, put a 1 bar moving average on price, make it invisible and apply ROC to the 1 bar moving average which is the same as price. The divergences in price/ROC are a great signal.

The longer term Stochastics 50 period reduces noise and shows trends, divergences here are all I care about OR embedded Stochastics. *One of my best testing/performing trading systems only goes long stocks that have stochastics embedded above 75/80 and short stocks embedded under 25/20, as soon as they move away from the embed, the position is closed. THIS IS NEARLY THE EXACT OPPOSITE OF THE NORMAL APPLICATION FOR STOCHASTICS.

Here too, I'm only interested in divergences.

Note the Doji candlestick, these are still very useful in my view. The thing that makes these candlestick reversal patterns the most effective (especially upside ones like this) is a simple volume spike, think of it as "mini-capitulation" or for a top turning down, "churning"