The Trump rally, much like the Trump presidency, is looking a little green around the gills as the latter approaches the 100-day mark. Although the stock market has seemed virtually bomb-proof, rarely selling off hard for more than a day, rallies since the broad averages topped on March 1 have grown noticeably weaker. The biggest “up” days in the last month have begun with gap openings that produced bull-trap highs. Under the circumstances, permabears itching to get short can be pardoned for wanting to take a shot. Let’s tee up a speculative play with a 1.10 bid for four Apr 21 207 puts, good through Tuesday. That’s about where the puts should be trading if DIA rallies to the 207.78 midpoint pivot shown in the chart. This price is intended as a rough guideline, and so I’ll suggest trying to improve on it by simply observing the bid and offer for the puts fall as the pivot is approached. Your bid should be midway between bid and offer when DIA gets within a few ticks of 207.78. Stop yourself out of the position if the options trade for 0.25 less than you paid for them; then, plan on trying again at D=209.66. I’ll provide guidance in the chat room according to how things develop.______ UPDATE (Apr 10, 10:52 a.m. ET): With stocks in a weak rally this morning, volatility is getting crushed. My guesstimate on the puts we’re bidding is about 94 cents, well below the 1.10 noted above. In any event, you should follow my guideline for buying the options if and when the underlying very closely approaches the target. _______ UPDATE (Apr 10, 6:22 p.m. ET): The puts stayed out of reach because DIA rallied no higher than 207.32 before relapsing moderately. We’ll stay the course (see above) for one more day.
