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Trade Details: Bought to open 5 Dec 9th JPMorgan Chase & Co (NYSE:JPM) 78 puts for $1.09, $552.65 total cost (43.5% of account), 12 days to go. The trade executed at 15:53:13 when the stock was approximately $78.13.
Potential: I am targeting the chart's last gap at $76.73 to close the position before expiration. Concurrently, I'll be watching MACD divergence on the two fast charts below as the daily chart moves toward a bearish cross. I will look to exit the position at a loss if the contract is marked at or below $0.83, a level that got much closer immediately after I entered the trade when JPM spiked up $0.25 into the close (taking the puts down 12%).
Thesis: JPM and its sector's ETF, the Financial Select Sector Spider Fund (AMEX:XLF), spiked after the election earlier this month. The two main drivers were the perception of lower regulation and higher interest rates. Over the last several sessions, that euphoric move higher has slowed.
With the VIX up, and JPM trading through its morning low late in the session, I decided to participate with put options. Many traders were taking similar positions today. The 2-hour MACD indicator has been moving smoothly, and it toggled back to divergence today. Emerging global risks, a skittish broader market and the potential for oil to trade down support positions that benefit from lower markets.