Comment by phil

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phil
February 11th, 2016 at 2:45 pm

Given the above 5% Chart, it looks like we need another short and the S&P has held up better than the rest so far, so we'll make a new hedge for the OOP and the STP.  This, of course, only applies if you didn't already do our SDS or SQQQ hedges from last Friday's post:



SDS is at $24.80 so say $25 and it's a 2x ultra-short on the S&P so $27 would be our goal and soon would be our timeframe if things are going south from here.  March spreads are still 30 days so let's add to the STP:



• Buy 100 SDS March $24 calls at $2.03 ($20,300) 
• Sell 100 SDS March $27 calls at $1.08 ($10,800) 
• Sell 5 CMG March $385 puts for $5.20 ($2,600) 
• Sell 5 BA Jan $90 puts for $8.60 ($4,300) 

That's net $2,600 and we risk owning 500 shares of CMG and BA cheap (and we'd roll them to the LTP) and it gives us $30,000 of protection.  

In the OOP, our variation will be:

• Buy 50 SDS March $24 calls at $2.03 ($10,150) 
• Sell 50 SDS March $27 calls at $1.08 ($5,400) 
• Sell 4 BHI 2018 $50 puts for $14.50 ($5,800) 

That's a net credit of $1,050 on the $15,000 spread and bumps our short BHI puts from 6 to 10 (and we still have a lot of faith in that one).