This is the daily chart of SPY that is displaying, in my opinion, a megaphone pattern that will likely resolve to the downside. As evidence of this being a megaphone pattern is the disjointed trend lines as well as the relatively large volumes that correspond to the "higher highs" and "lower lows." My reasoning for expecting this to be a reversal pattern stems from seeing bearish divergence in a number of indicators- the daily chart displays a bearish cross in the True Strength Indicator and the picture that I've included also shows a bearish trend in the TSI.
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I bought Nov 8 255 SPY puts on Friday. S&P futures are selling off modestly right now.. I expect this bearish wedge to break to the downside either on Monday or Tuesday.
Where is the line in the sand where you would call your hypothesis wrong? Thanks
Bryan_Ali
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@DeanMachine89, A breakout above the upper trendline.. I may post an update tonight on SPY
DeanMachine89
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@Bryan_Ali, it should be interesting! Spy is a fickle bastard that is for sure. It seems like 9 out of 10 times that it technically looks like a short the bastard just keeps chugging along lol.
I love SPY options! So much volatility, liquidity and you get 2 strikes each week along with an extra 15 mins each day to trade them. I just love them! They print money! Just buy a strangle on open (unless there is a spike in implied volatility... of course wait for that to avg back out!) for the closest expiration and as you find the trend and pivot points all you have to do is keep adjusting it at the pivot points. I made over $2250 on a measly $3300 by using this strategy. Once it hits the pivot and reversal is confirmed I take my gain, double or triple down on the losing leg and then use the same amount to buy back the calls or pits I sold for a gain earlier. So the leg that was sold for a gain is now back in play but it's a half to 1/3rd of the amount currently invested in what was the losing leg. When I buy back the winning leg that I had sold for a gain I buy same expiration but farther OTM. That way if it breaks pattern I'm always hedged and my ROI will be much higher on the leg with it being even farther OTM! As long as there is good volatility there is absolutely no reason that someone who only has 2-3k to trade with can't double their money with these weekly SPY options! I screwed myself by not holding my puts on my $2250 day. I would have made roughly another $800-900 had i held on. That means I would have doubled my trading money in 1 day just by using SPY options... It wasn't even expiration day either lol! I figured $2250 in 1 day off off of only 3300 was fine with me. I mean it avgs out to over 550k a year and at only 27 years old I won't complain. Had i 33k to trade instead of 3.3k I would have made 22.5k in a day lol no big deal. I love SPY options that is all my friend. Good luck and happy scalping buddy!
Bryan_Ali
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@DeanMachine89, Thanks for the reply, maybe I should have done a strangle as this trade isn't working out at all so far. Good luck with yours..