It’s time for an update on my long SP500 put position. The SP500 closed at 1262.80. I’m long the Sep 1275 puts. The delta is up to 0.55. That means it’s 55% of a full short position. The sentiment indicator hit the lower band with today’s close. Small cap stocks in the Russell are taking it hard in the last week. This is the first signal of a potential bottom coming. Thursday is the June unemployment report.

The Gameplan

1. A rally. I will cover my puts if the market trades above 1293. That is the high for the week. A move above there could be the start of a meaningful bounce.
2. Unchanged .I’m hoping for a big jump in the unemployment rate. Last month, the market had a big selloff on the unemployment report after a lackluster open. If the market trades in the unchanged area I will let it develop and use a trailing stop of the previous day’s high.
3. Big gap lower. If the market opens on a good gap lower I will sell 50% of my puts in the first 30 minutes.

The market will not stay in this area for long. I anticipate a big move that will spike the volatility range indicator in the next few days. It could be a rally or a selloff so I want to give it some room to move lower but I will be aggressive if it moves higher.