So I have some put options that are up 50% since I bought and up 50% over the week. The question I need to answer is whether I should sell tomorrow as I go into the weekend and buy again next week or stay where I am. Because I am up so large it would make since to sell and lock in profits now as opposed to waiting it out.
Things to watch with put options:
- the underlying (in this case the S&P 500 index)
- volatilty, which can be easily tracked in the VIX
Both of these are working into put options' favor right now (high volatility/VIX with a lower S&P).
Holding over the weekend:
Convention Wisdow says to sell into the weekend because there is always news that comes out from government agencies that will make the market move if there are major issues out there (think May 7th - market is down and over the weekend Europe announces their bailout package). The result of the May 7 weekend was to drive prices up and volatility down (hurting put options). In retrospect I should have sold on Friday and bought Monday.
So.... What I think I will do here is sell my puts tomorrow and wait over the weekend to see if there is any big news coming out. I will probably buy on any positive moves in the markets on Monday. I think this market is going lower... much lower, so I will short the market again through put options.
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