As we discussed on Tuesday post close update the market has rallied to wear off some overloaded bearish sentiment. While this bounce could last into Friday, I expect a lower close on Friday. Further I think next week will be negative for stock markets.
For Target Zone Trading we are currently holding profitable short option spreads in JPM and SQ, and about even on PYPL and SPY. PYPL (PAYPAL) is the newest position and worthy of a look on the short side. Puts aren’t crazy for time premium, but in-the-money puts represent almost dollar for dollar moves so should be considered. For example the March 31 expiry 80 puts will move almost dollar for dollar with the stock. We are short the stock with breakeven on our option spread of 74.20 for the stock.
My opinion the next target for SPY is 385 in March.