Portfolio 2 — Trade Alert: Positive delta adjustment
Rolling the SPY Short Put Up on a Down Day
TonyB Commentary
Well, we finally got a down day.
After weeks of relentless buying pressure and one of the strongest stretches we’ve seen in recent years, the market finally showed some signs of weakness. Even then, the selling was relatively orderly and far from the type of panic that would suggest a meaningful change in trend.
For our account size, we’ve intentionally been carrying a relatively modest amount of long delta in SPY. Given the market’s extended condition and the lack of meaningful pullbacks over the last several weeks, I felt it was appropriate to make a small positive delta adjustment early this morning.
Volatility also showed some life today. /VX traded up to a recent high of 17.70 before pulling back, though it remains at historically low levels. While that’s hardly a sign of fear entering the market, it does suggest traders are beginning to acknowledge at least the possibility of increased movement after such an extended rally.
The S&P futures traded down to approximately 7517.50 early in the session before recovering a portion of those losses, once again demonstrating how eager buyers remain to step in on weakness.
Against that backdrop, I elected to roll up existing short puts, creating a very small positive delta adjustment. Nothing aggressive. Just a disciplined attempt to improve positioning and maintain participation should the market resume its upward trend.
As we’ve discussed repeatedly, I prefer making these adjustments during periods of weakness rather than chasing strength after the market has already rallied. The challenge lately is that opportunities have been scarce because every dip has been shallow and short-lived.
For now, the game plan remains unchanged:
Make incremental adjustments
Maintain disciplined sizing
Respect the trend
Keep buying power available
Let volatility come to us rather than forcing trades
One down day does not change the bigger picture. But after nine consecutive weeks of gains, it is nice to finally have at least a small opportunity to improve positioning.
The Trade:
