Roller Coaster Ride Anyone?

What a wild ride the market had this past week. The $INDU was already trading below its 200dma (daily moving average) however on Friday of last week the SPY (or the ETF for the S&P 500) also closed below  that same moving average so we now had a fairly good idea what was coming — and it would not be favorable for the bulls.

The $INDU was down over 1000-points in just the first 30-minutes of trading when the market opened for trading on Monday. The $VXO or the volatility index for the S&P 100 initially spiked above 40% however as the week progressed and the bulls started to take a stand the $VXO settled back down to 25%.

Remember that as the market goes up the volatility drops and vice versa. This is something that as option trades we need to keep an eye on since it provides us with amazing insight on how to protect our invested capital.

An Active Traders Dream Week

This trading environment created a dream week for my active trades where I plan to be in the trade for just four trading days. Remember that when I say active I am not saying day trading. I actually position myself at the beginning of the week with an option that expires at the end of the week.

Those options are known as Weekly options. My exit strategy is when I am profitable (currently between 30%-50%) or by the fourth trading day. That way I am in a cash position into the weekend and ready to repeat the process at the beginning of the following week.

Not to be outdone by my active weekly trades my longer term strategy (where I am in a trade for 4-5 weeks trades on average) were outstanding as well. I was positioned in both AAPL and GS.

My GS and AAPL trades were going for well over 100% profit in with Monday’s drop. I myself had already previously closed out my bearish AAPL trade for 29% profit and my bearish GS trade for 18% profit however if there was ever a time to close out a profitable bearish trade the past week was certainly it.

The Week Ahead

With all of that drama the SPY still managed to end positive for the week. We are however officially in correction territory regarding stocks. We are however entering the first week of September where on 7 September 2015 the markets will be closed as we celebrate Labor Day here in the US.

I would not be surprised to see a bit of buying entering into the markets. The markets have the tendency to rise ahead of a long banking holiday. Might this potential rally be enough to cause the SPY to close back above the 200dma or might it be seeing up the markets for additional downside pressure? Stay tuned for a great week ahead!