Update 4/30/2018: I exited SPY as it continued an uptrending counter-trend correction. The decision was based on Elliott wave analysis and the timing on the Fisher Transform metric.
By my count SPY continued to trace out a 4th wave to the upside at the Minuette degree. It has completed requirements for an A-wave to the upside at the Sub-minuette degree, but without guarantees that the A-wave is indeed complete.
With 18 days left until expiration of the position, I chose to roll out now, for a $4.71 debit with shares at $265.83, and shall re-enter a bear position at an appropriate moment with a later expiration.
Shares rose by 2.6% over 27 days, or a +36% annual rate. The options position produced a -12.3% loss for a -166% annual rate.
I have entered a short vertical bear spread on SPY, using options that trade for the last time 45 days hence, on May 18. The premium is a $4.13 credit and the stock at the time of entry was priced at $259.00.
I made the decision to enter the trade based on the Elliott wave count. I see SPY as being in a 3rd wave down within a 3rd wave down at the Minuette level, which is what I normally trade, within a 1st wave down at still higher levels.
The present wave down, which began on March 13, has yet to move below the Minuette 1st wave endpoint of $252.92 on Feb. 9. A decline below that level, which I’m betting on with this trade, will confirm that the 3rd wave is underway. A move back to the upside would suggest that the 2nd wave in the upward correction is not yet complete and doing something other than a simple zig-zag. Since 2nd waves almost always tend to be simple zig-zag patterns, I would be surprised to see something more complex happen.
Time will tell, of course, and if I am proven incorrect in my judgement, my analysis will tell me when to get out in order to mitigate my losses.
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