Friday 27 Aug

Keeping it short on this Friday evening. We had a successful test of that 1037 level in the S&P futures again this morning with huge volume coming in that area, 137k contracts traded on 5min bar. Same low as Wednesday and very similar rally making it a bit higher this time and closing the gap from Monday at 1064.50. If you followed my Tweets today I was mentioning this 1064.50 many times throughtout the day after I saw the big buying on the lows. What does the last few days price action means? In my opinion we are now heading back towards the top of the recent range at 1098.50. In fact the top last week at 1098.50 was also formed following 2 days failure at 1098.50 to the tick, almost the same scenario that happened now, just at the other end of the chart, quite interesting.
So this is what I did today. As I mentioned yesterday I took off some options heading into GDP data, I was expecting a bit bigger move on the release, but that didn't really happen and we had to wait until Bernanke came out on the wires to get some real movement going. Pretty much more of the same from Bernanke, that they will do what ever possible to save growth. Since I had most of the options this morning above the opening price I figured I had to sell a few puts when the buying came in to hedge a bit in case we got a solid rally back towards 1080 and above, where I have the outstanding calls. So, I sold 1020's puts for September when it was about to base. Also closed out the weeklies expiring today quite early in the session as the decay had mostly played out its role. No point trying to desperately make the last few points out of the options on expiration day. That can become very costly if you are wrong on directon and have to hedge them. Since I was a bit more exposed to the downside then normal I had to keep a bit of hedge being short S&P futures on the way up against my 1060 puts from last week. I only hedged about half the short delta, so the rally played out ok for me in the end, but could have been a bit more aggressive towards the long side following what I saw as a clear bottom at 1037. I did one stock options trade, bought the 31 strike calls expiring September in Fuel Systems Solutions (FSYS), paying 2.75 per contract.
At end of the day I basically have short calls in S&P above 1080 and up to 1100 and short puts from 1060 down to 1020. A bit narrow for my liking between some of the strikes, which I will adjust start of next week. I also have a RIG (Transocean) backspread expiring in October that I put on earlier this week, looking for a move back toward 60's.
As of close today, I am up 7.65% on futures and options for this month, which is the best month so far for my program. Have a great weekend, speak Monday, cheers