Stock Options Trading and the SP500

Friday's gains saw us return to the prevailing bullish market trend. The S&P 500 retraced to 1,487, which was consistent with my expectation.

In yesterday's surge, my bullish portfolio bias allowed for appreciation while short option premium keeps my account theta positive. It's a tough time to be an investor right now because we are seeing a "wall of worry" being built between rising interest rates, inflationary concerns, falling real estate prices, growing mid-east tensions, etc.

As options traders, there is a lot we can do to 1.) preserve our investing and trading capital, and 2.) position ourselves for gains. The typical mutual fund investor can only sit back and hope that the world turns in their favor.

With this correction apparently over, I will probably readjust my hedge positions. The SPYder put diagonal I mentioned in my last post will likely be rolled into a vertical credit spread consistent with the bullish outlook.

My expectation is that the S&P500 will make a new all-time high and work its way to 1,600. That is not a certainty, so we all need to stay sharp and remain observant.

Good trading!

Christopher Smith
TheOptionClub.com