Recall that my big picture context is a broad trading range while the stock market “marks time”. Within that sloppy sideways some stocks will be in bull market trends and some stocks will be in bear market trends. I switched to a long position in the semiconductor index (SMH) last week. The SMH has moved up and it’s time to take profits there. At this point I think it’s time to look for some sort of pullback in the SPY. Accordingly I have taken a long in APRIL SPY puts and a corresponding short in FEB SPY puts.

These are about 5 points “out-of-the-money”. In this case with the SPY at 510 the puts are 505 strike price. Lots of flexibility in this position to adjust as needed. Adjusting positions through spreads is one of the things I do a lot of in Target Zone Trading. When you are right you make money, but when you are wrong spreads can allow one to play defense, and eventually rescue a profit …. not all the time, but it is a great way to mitigate the downside of potential mistakes. So looking for a pullback in SPY, testing 600 or so in the SPY. 

Thanks,

Joe