Live: Friday, March 20, 2020

3:05 p.m. New York time

I have updated with results the analyses of my three bear call options spreads positions on SPY. They are:

I shall enter new SPY positions on Monday.

12:40 p.m. New York time

As it turns out, all three of my SPY short bear call spread positions exceeded half of maximum potential profit, which is my signal to exit. Which I did, and I shortly I shall update with results the analyses for SPY lots 9, 10 and 11. I entered lot 9 on March 16, and lots 10 and 11 yesterday, once again illustrating the velocity of market sentiment in these times.

12:25 p.m. New York time

On the S&P 500 chart, by my count the 3rd Elliott wave of the Minor degree in the decline that began March 3 continues its downward course.

I’d like to step back for a bit of orientation. In this discussion, I refer to three wave degrees, all following the same rules but nested one within the other, like Russian Matryoshka dolls.

R.N. Elliott, in his 1938 book The Wave Principlenamed nine degrees of wave. From the largest to the smallest, they are Grand Super Cycle, Super Cycle, Cycle, Primary, Intermediate, Minor, Minute and Minuette.

February 19, when the crash began marked the peak of the Intermediate 5th wave within a peaking Primary wave, and the decline that followed was Intermediate 1st wave of new Primary 1st wave to the downside.

In trading this bear market my primary interest is the Minor degree, with the Intermediate degrees proving a larger trend model and the Minute degree helping me understand where we are in the current Minor wave.

Internally, the S&P 500 is perhaps finishing up a Minute degree 4th wave correction upward, and after that it will continue with a 5th Minor wave to complete the Intermediate degree 1st wave of the decline from February 19, the day the crash began.

So far the Minor 3rd, at 15.9%, is shorter than the 1st, at 20.3%. It’s not a hard and fast rule, but the 3rd wave tends to be the longest of the three waves moving in the direction of the trend — impulse waves — so the assumption that the Minor 3rd wave will exceed 20.3% is a higher probability than that it will stop short of that level.

That gives us a probability that the Minor 3rd wave will at the least reach the 2280 level on the S&P 500, and there are no brakes there to halt the fall.

So, to current business.

My remaining MAR series options expire today. They are a sad remnant of the short iron condor positions I had entered in early February, before the crash. Earlier I exited the some of loss-making in-the-money wings of the iron condors, exited some entirely, and had two exercised, as described in my “Live” post of March 13.

In retrospect, which always provides the clearest view, I ought to have exited immediately after it became clear that we were in a crash, which was the S&P 500’s opening gap to the downside on February 24. In the future, during this bear market, I shall take it as a firm exit signal when a position moves above the strike price of its short call.

The three remaining positions, all truncated to short bear call spreads, have no value — which means a 100% profit for short positions — and I expect them to expire after the closing bell. There is a some theoretical chance of exercise, but I’ve not seen that yet on worthless options.

Over the weekend I shall update with results the analyses of the full iron condors — the losses taken March 13 and the full-profit expirations of today.

Otherwise, I’m fully invested in short bear call spreads on SPY, which tracks the S&P 500, with funds also invested in long shares of SDS, which does the inverse of SPY and doubles the movements. No trades in sight today.

By Tim Bovee, Portland, Oregon, March 20, 2020


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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