Spyder Index Options

Continuing on the same theme as the last post on Index Options I want to give an example of trading index options. The chart below shows the 3 month daily chart of the S&P500 index. As can be seen prices were in a steady state of decline for an extended period of time hitting a low on 7/14 and due for a corrective bounce to the upside. When such price action occurs there is inevitably a pull back in the corrective uptrend. This pullback occurred on 7/28, two weeks after the initial low. Click on charts to enlarge.

Using a custom indicator I developed I was able to pick this second bottom in the market as the ideal entrance into a long option position. Since this was a counter trend trade and going against the overall downtrend of the market the price change was remarkable and able to produce a greater than 100% gain in only a matter of a few days. Please be sure to subscribe to my blog as I post other remarkable trading opportunities in index options.