QQQQ

We've traded this vehicle successfully before (and unsuccessfully as well), but the only number I can discern that we might use for tightly stopped bottom-fishing lies at 42.25, a Hidden Pivot as well as my minimum downside target for the next 3-4 days.  For what it's worth, the hourly chart brings little more clarity to our task than the E-Mini S&P chart featured today.  Lesser patterns going back 2-3 weeks appear to have exhausted their downside targets, but if you open up more of the panorama, using 240-minute bars to project back to December, the May 6 Flash Crash still dominates the landscape. It yields a nominal Hidden Pivot target at  40.17, but the number has been rendered all but valueless for trading because the pattern that produced it has been muddling its way lower for an asphyxiating three-and-a-half-months. In retrospect, covered-writing into rallies could have been a winner, although not exactly the ticket to riches. _______ UPDATE: Cancel the trade, since it appears that the lunatic fringe has seized control of the broad averages ahead of the holiday weekend.

Our modest short position has ceased to be worth caring about. Rather than allowing the puts to waste away as we become increasingly forgetful about checking on them each day, I’ll suggest closing out the position -- long  two April 48 puts -- shortly after the opening bell if the options have traded for 0.60 or less.  I have couched the recommendation in those terms because I do not want you dumping the puts if the QQQQs begin the day looking like hell (unlikely as that may sound).  ______ UPDATE:  We exited the puts for 0.50 (or so), sustaining a whopping loss of about $15 in the process.  The lesson here is that even if your entry is perfectly timed, and even if you do some judicious, perfectly timed partial-profit taking along the way, it is still not possible to make money with put options (unless, of course, you are a naked seller of them).  This has been true perhaps 99.97% of the time since listed options were first offered by the CBOE in 1973 and it remains true now, even if the shorting has faded a rally that we all know is doomed.  

We hold two April 48 puts for a profit-adjusted 0.56.  The Tradestation platform is ignoring my request for put-option prices at the moment, so I'm flying in the dark as far as the recommendation to close out one of the two puts for 1.32 is concerned.  Leave the order in for now, but check back an hour into Monday's session to see if there are any adjustments. My current downside target is 47.63, somewhat higher than the 47.09 target we had been using.

From an original position of four April 48 puts purchased when the QQQs were topping on Friday, we hold two contracts with a cost basis that has been lowered by profit-taking to 0.56. Now let's offer another put to close for 1.32, where I estimate they should be trading if the Cubes fall to a 47.09 target.  That's a Hidden Pivot, and it can serve as our minimum downside objective for the near term. I've included a snapshot of a calculator that helped me determine a fair value for the puts.  The 15.7 volatility came from Tradestation OptionStation Analysis and represents implied volatility for the "offer" side of the spread.

Irrespective of whether the Dow is about to rally 239 points to tie the 1930 recovery, we should try to short this vehicle when it reaches the 48.12 target shown in the chart. Buy four April 48 puts, which should be selling for around 0.90 at the time, no stop-loss.

Offer the round lot of stock we acquired for 44.95 at 46.11 to close. That's two cents below a somewhat muddy but nonetheless serviceable Hidden Pivot target.  If the order fills we'll still hold seven April 42 puts for an average 1.05 and a March 44 put for 0.23. ______ UPDATE:  We sold the stock on the opening, realizing a $116 trading gain. Imputing the profit to the April 42 puts will reduce their cost basis to 0.89.  No further action is suggested at this time.

We hold seven April 42 puts for an average 1.05 and a March 44 put for 0.23. Buy 100 shares on the opening as an offset, since the short-term forecast is bullish.  That will still leave us slightly short, since the puts have a delta value of about 18 apiece, but the backspread effect will make us net long quickly if the cubes rally, since the puts will shed deltas.  Conversely, we would get short in a hurry if QQQ falls, since the puts will accrete deltas. ________ UPDATE (9:35 a.m. EST):  We bought a round lot for 44.95 on a gap-up opening. The cubes have since traded as high as 45.13.

We hold seven April 42 puts for an average 1.05 and a March 44 put for 0.23.  Let's try to trade against the position today by bidding 44.35  for 200 shares , stop 44.29.  Our bid lies two cents above a promising midpoint support on the hourly chart (where A=44.87).  If you hold no position, you can open one for a scalp. ______ UPDATE:  The Cubes opened on a gap well below our bid, so the order went unfilled unless you executed it before the regular session began.  That would have generated a very small trading loss of about $12 plus commissions. 

We continue to hold seven April 42 puts for an average 1.05 and a March 44 put for 0.23.  Cover the position if the QQQs touch 45.73 today.