Buy Put Options – Apple Saved the Day But This Bounce Won’t Last

Todays Stratedy for Options Traders - First let me point out that I just posted a free educational course on one of the most powerful options trading strategies - bullish put spreads. You hear me talk about them all of the time - now learn how to trade them. My primary options trading strategy has been selling bullish put spreads. Yesterday I bought back my put spreads for a small loss. I entered these positions last week and time decay had not whittled away at the premium yet. Normally, I am able to hedge these positions intraday, but the overnight gap left me exposed. Fortunately, I was in the right stocks and they held up well relative to the market. Bullish put spreads are a neutral to slightly bullish strategy and I was expecting decent price action for the next two weeks. I mentioned yesterday that I would aggressively be buying puts and I did throughout the day. I also I shorted the S&P. Stocks bounced mid-day and I started to chicken out. My entry was early and I had a chance to scratch my trades near the closing bell. Apple, Facebook, Yahoo and Alibaba had me spooked. Furthermore, the market has had a tendency to rally into FOMC statements. I'm glad I went flat because I can reload at better prices. Today I will be buying put options. I won't get overly aggressive before the FOMC. I will buy a few under SPY $204 this morning. I will add after the FOMC reaction. From that point on I will add below SPY $203 and I will aggressively buy below SPY $201 (100-Day MA). Posted 10:20 AM ET - Tuesday's market decline was very bearish. Earnings season typically kicks off with a bang because the strongest companies announce early in the earnings cycle. I thought we would get a relief rally that would last a couple of weeks, but profits/guidance has been disappointing. Stocks are recovering this morning, but this bounce won't last. Apple saved the day by smashing earnings estimates. The largest company in the world is up 8% this morning and it is lifting the entire market. This will be a very tough quarter for them to repeat. Facebook is up slightly this morning and Alibaba is down. Amazon will post results Thursday after the close along with Google. Amazon will post strong revenues and in line profits, but valuation will come into question as it always does. Google has been struggling and traders will search for the next growth engine. I don't believe either of these announcements will impress. The FOMC will release its statement this afternoon. Given the rally in the US dollar, I am expecting dovish rhetoric. The bounce we are seeing this morning won't last. Apple is a one-off victory and the rest of the news has been disappointing. We did not get much of a year-end rally and January is typically a bullish. In the last three months we have seen heavy volume declines and light volume rallies. The market is testing the 100-day moving average with greater frequency and the bounces have been brief and shallow. Buyers are not engaged and the technicals are deteriorating. Global economic conditions are soft. Europe and Japan could easily slip into a recession and QE is not stimulating activity. China has been leaking oil for many months and it continues to drift lower. The US has been the exception and domestic growth might be called into question after the weak durable goods number yesterday. Eventually, the strong dollar will hurt exports. The plunge in oil is partly due to an increase in production, but the decline could also be signaling weak demand. Greece is back in the headlines and the new party has not toned down the rhetoric even though they need the next tranche of funding in February (28th). Greek bond yields are jumping and credit concerns will surface. The relief rally this morning will not last and I am looking for put buying opportunities. . .

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