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2015issue C1042-43

Overbought technology index: a long put via an inverse proxy

After the July 2015 highs, a technology-heavy index proxy was read as a support-and-volume pullback. The same thesis was then expressed with a long October call on an inverse index proxy rather than an unbounded short of the cash proxy.

  • After the July 2015 highs, the technology-heavy index proxy was described as tracing lower highs and lower lows, with volume fading into those highs.
  • A support-break map withheld the nearby swing-low objective, near 105 and about a 6 percent decline from the 112 area, until marked support gave way, and treated the setup as a profit-taking correction.
  • An unbounded short of the cash index proxy was set aside for a premium-capped overlay: a long October 32 call on the inverse index proxy, shown near 1.85, so loss equaled the premium paid.
  • Editorial reading: the same support-and-volume thesis becomes one testable procedure for entry, stand-aside, and exit, instead of an unbounded short or a commentary-led opinion.
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Current trackLong put26 readingsIndex proxy comparison29 readings

The cash-index thesis

After the July 2015 highs, the technology-heavy index proxy was described as tracing lower highs and lower lows, with volume fading into those highs.

Index proxy comparison expressed that sector view through the liquid stand-in and then judged it against support, volume, and capital at risk.

A support-break map withheld the downside objective until the cash index proxy lost a marked support line, then aimed toward a nearby swing low near 105, framed as about a 6 percent decline from the contemporaneous 112 area.

The setup was treated as a profit-taking correction rather than a crash, with a quieter policy-news window offered as the backdrop.

The unbounded short and the inverse substitute

Selling the cash index proxy short was presented as a borrow-and-sell structure whose loss is theoretically unbounded if that proxy rallies.

That unbounded short left no fixed ceiling on the loss if the cash index proxy rallied.

An inverse index proxy was introduced as a short-horizon substitute that tends to rise when the cash index proxy falls. The vehicle in the archive was an inverse leveraged index proxy, and that inverse link was described as imperfect.

A premium-capped overlay as a long put

At an illustrated price of 32, one hundred shares of the inverse proxy required 3200 of capital. A leveraged response to a 6 percent cash-index decline was sketched toward 36.

A long October call struck at 32 on the inverse proxy, shown near 1.85, was used as the long-put-style overlay.

A long put is a defined-risk long-premium procedure whose loss is capped at the amount paid and whose payoff improves if the referenced market falls, or if an inverse proxy of that market rises.

The premium-capped overlay bought that call so the maximum loss equaled the premium outlay, while upside on the call remained theoretically open-ended if the inverse proxy rose.

The long-only contrast

A long-only hold was contrasted with using inverse proxies, or long calls on those proxies, so a falling cash-index tape still had a defined procedure.

QQQ daily price against the $105 breakdown target

A trader watching this tape sees QQQ still above a rising support band after the mid-July spike, with 105 marked as the next pocket if that band fails — a roughly 6 percent slide from the 112 area the article was using as spot. The path is a hand reading of the published daily candles (the 111.60 last print is taken from the chart header); the 105 line is the target given in the text, not a statistical fit.
A trader watching this tape sees QQQ still above a rising support band after the mid-July spike, with 105 marked as the next pocket if that band fails — a roughly 6 percent slide from the 112 area the article was using as spot. The path is a hand reading of the published daily candles (the 111.60 last print is taken from the chart header); the 105 line is the target given in the text, not a statistical fit.QQQ (PowerShares QQQ) · Daily · 2015-03-12T00:00:00.000Z to 2015-07-22T00:00:00.000Z

Daily candles were sampled at the printed date ticks and at the visible swing highs and lows, rounded to the nearest half dollar except the printed close. Intra-day wicks between those marks are not restated. The rising support series is the red channel line on the same figure, read to about 0.5 dollars.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
16 of 22 in the Long put track
201829-29 pp.Next on Long putReplace futures stops with short-dated long putsThe same index-futures day-trade signals and timeframes can be mapped to a long weekly put on a short signal or a long weekly call on a buy signal.
All readings on this track · 22 readings
  1. 1984A long silver put as a prepaid loss cap
  2. 1984Spectral window gates for index long puts
  3. 1990Breadth nonconfirmation as the gate for a volume fade and long-put case
  4. 2002Volatility-first construction for a bearish put or debit
  5. 2002Name the regime and the season before choosing a long put
  6. 2005Critique of put spreads versus outright long puts
  7. 2007Sector put hedges, automatic exercise, and pin risk
  8. 2008Margin shock, defined-debit options, and selective premium
  9. 2008Ranking in-the-money puts by breakeven rather than cheapest premium
  10. 2012Evaluating long-put moneyness when implied volatility shifts
  11. 2012Sizing a long butterfly for early assignment and a long option for gamma
  12. 2013Gold after the April break: option-spread vehicles and a long-put hedge
  13. 2014A defined-risk option case for the mid-February to mid-July energy window
  14. 2014Long put versus vertical debit spread on a Treasury ETF
  15. 2015Defined debit call spread on a health-insurer worksheet
  16. 2015Overbought technology index: a long put via an inverse proxy
  17. 2018Replace futures stops with short-dated long puts
  18. 2018Constructing short-dated long puts around weekly expiration
  19. 2018Four decisions before a portfolio protective put
  20. 2018Incremental producer hedging with puts and risk reversals
  21. 2019Put butterfly versus long put in a volatility spike
  22. 2020Scenario-first SPY put hedge: butterfly versus long put
By fieldOptions and volatility193 readingsBy year201590 readings
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