Out of SSO

That trade had me a little worried. As is the problem with trading purely on extreme technical conditions, things can always get more extreme. After making a small bet on a bounce because of the S&P 500s divergence from it's 10 day EMA on Tuesday, Wednesday came along with more bad news out of Europe and after a hard drop in the last half hour, my SSO puts were in the money with only one day left of trading(Thursday was a holiday). So while I knew a bounce was likely coming soon, it could have easily waited until next week leaving me with a decision about whether to roll forward or take a loss. Luckily the futures reversed their early morning losses and we're getting a small bounce today. With this being the day after a holiday, volume is going to be weak, so instead of waiting around to see what happens today, I'm closing out now and shutting down for the week.

• Buy to Close: 1 SSO Nov 25 2011 40.0 Put @ $0.08

This wasn't a huge gain, especially considering the margin requirements on the options of leveraged ETFs(I closed it out with a 1.5% gain in 4 days), but despite the hiccup on Wednesday, these are typically fairly safe trades. When the technical conditions and available margin are there, I like these a lot.


The Numbers

• Cash: -$8
• Short Option: +$10
• Margin: -$2,380