The broad averages have made no headway for nearly two months and are looking heavier by the day. Although we should have no illusions about timing the onset of the Big One, we can still prepare for it without taking much risk. Accordingly, I’ll suggest buying the Oct 21 200 – Sep 16 199 put spread eight times for a 0.57 debit. This is a slightly vertical calendar spread with a bearish bias and a maximum payoff if SPY falls to 200 between now and October 21. The idea behind the strategy is to bide our time waiting for the Big One, paying for our long puts by shorting weekly puts against them every Friday. We will do so by rolling the spread forward each week. This means that on September 16, we’ll cover the short Sep 16 puts (i.e., buy them back), presumably for 0.01-0.02; at the same time, we’ll short an equal number of Sep 23 199 weekly puts.

By rolling the calendar spread as described, we’ll retain our monthly Oct 21 puts while always being short more-rapidly-decaying weekly puts against them. Ideally, if SPY falls toward 200 over the next few weeks, we’ll receive higher and higher prices for the puts that we short.  With any luck, SPY will drop to 200 over the next six weeks, and the Oct 21 200 puts we’ve held all along will effectively have cost us nothing.  For now, you can bid 0.57 for the spread eight times, good till Thursday and contingent on SPY trading 218 or higher. If you find the above even slightly confusing, DO NOT ATTEMPT THIS TRADE.  There will be other chances to try similar strategies in the future, but you should watch from the sidelines the first few times in order to gain experience. Note to those who had no difficulty understanding the above: There is gamma risk below 200, but I have sought to reduce it by suggesting that you short puts of a lower strike than the ones we will hold.________ UPDATE (September 6, 5:08 p.m. EDT):  The spread closed at 0.47, so I’ll assume all who bid it were filled. I’ll wait for reports in the chat room before I establish a cost basis, however, since the position was an easy buy intraday for 0.53.______UPDATE (September 7, 10:07 p.m. EDT): Prices reported in the chat room ranged from 0.44 to 0.56, so I’ll use 0.56 — the worst actual price achieved — as our cost basis. For now, bid 0.31 for eight more Oct 21 200 puts, good-till-canceled._______ UPDATE (September 9, 11:50 a.m.): Our SPY put spread is now trading for around 0.79 (in promotion-speak, that’s a 4 zillion percent gain if annualized). Notice that DaDirtballs are not exactly giving away the Sep 16 199 SPY puts that we are short in the spread. I’m going to suggest rolling the spread anyway, as follows: Buy (cover) the eight SPY Sep 16 199 puts we are short, while shorting eight SPY Sep 23 199 puts for a 20-cent credit. Our offer is away from the market at the moment, but the spread order could fill if SPY drops by another point or so.