A pullback is coming, here’s how to trade it
Charles Sachs has utilized S&P 100 for the past 14 years, both as a trader and an advisor. He uses 24 proprietary indicators in order to structure options strategies which can generate gains whether the market moves up, down or sideways.
As of 7:00 a.m. est., financial markets are set to open lower with the S&P 500 futures trading down 1.0 point, which is .50 of point below fair value.
The short-term market trend is up, and overbought, and the intermediate-term market trend is up.
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PowerRating) (S&P 100) index traded higher Wednesday up 2.18 points to the 582.01 level. Financial markets were closed yesterday for the Thanksgiving day holiday.
We are currently holding the XEO 605/595 put spread trade, which will profit with the S&P 100 index trading below the 596.25 level, and will attain maximum profitability with the index trading below the 595 level.
Since the XEO index closed Wednesday at the 582.01 level, the index can decline, sit still or go up by approximately 13 points and our recommendation will achieve its maximum profit of 14 % in 8 weeks from today.
For a point of reference, a 13 point rise on the XEO index would be the equivalent of a 260 point rise on the Dow Jones Industrial Index. Thus, the Dow Jones Industrial index can go down, sit still, or go up by about 260 points from current levels and our trade recommendation will achieve maximum profitability.
It is our expectation that the financial markets will begin a short-term decline phase as early as today given that they are overbought, and that they attained long-term resistance levels on Wednesday.
Going forward, we will consider selling a put credit spread against the put debit spread we are holding, and bring back additional funds to our accounts. We will only undertake such a trade if it can be executed opportunistically, and within our trade parameters.
Sincerely, Charles Chief Options Strategist