I neglected to put a cap on the Feb 26/Feb 12 150 put spread Friday, but its purpose was to get us short at the Hidden Pivot target of a relatively modest rally, not to jump in the path of a speeding freight train. Be that as it may, I’ll suggest using a 0.20 stop-loss for the four-lot position, meaning you should bail out on a 0.20 offer if it looks like the spread is trading easily at that price. For future reference, the same rule of thumb applies when you are bidding for options: If they come too easily, you are bidding too much. Option trades offered herein are typically not going to offer the juicy odds and precise risk control we get buying stock or futures using straight limit orders or ‘camouflage’. Although puts and calls, with the leverage they offer, ‘seem’ like low-hanging fruit, I’d suggest that you trade the mix of ideas and styles offered in my touts and in the chat room rather than focus on just the option trades. When in doubt about how to price them, you can set bids for options using Hidden Pivot targets rather than trying to guess. Meanwhile, the chart shown is for the underlying vehicle, DIA. It says that if p2=164.36 is exceeded even by a little bit on Monday morning, that D=166.32 will be reached. You can short there with a tight stop — much more aggressively if you are long for the implied 200-point Dow rally to it.
