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SPX expected move for February 26, 2015

I would like to start posting this series of my market expectations, but at this point, I am not sure how consistent I will be able to be in publishing this series.

My intent to publish the charts below is to show where the market may go during the day in relation to my weekly options I trade against SPX. It sets the boundaries for the day and not the direction. It may go up or it may go down. The goal is to determine how safe my trade would be until expiration.

For example, now we have a trade out there – a bull put spread 2080/2085 against SPX. With my expected move for tomorrow, this trade should be safe. Of course it may change, we may see some ultra bad news, or investors freaking out for no particular reasons and all bets will be off. The market may move lower than my expectations. But that would be a statistical extreme if that happens. So there would have to be a real strong catalyst to move the market beyond those boundaries. See the chart below:

SPX expected move

How to read this chart:
– the grey box indicates the boundaries where I expect the market to stay next day
– the horizontal magenta long-dashed lines are bearish levels, the second lower line would be a normal max. low level, the thrid lower level is considered as extreme move
– the horizontal yellow long-dashed lines are bullish levels, the second higher line indicates a normal move, the third upper line an extreme move.
– the cyan line is the mean level, where the market would tend to return from extremes
– the long-dashed red line is the same mean level as the cyan one, but for the entire week, while cyan line is for the next day only
– the short-dashed yellow and green lines are the same levels as the long-dashed, but for the entire week, while long-dashed are for the next day
– the lines with a price tag indicates an open trade, the solid line is the critical position. The trade must stay above or below this line (depending on the trade)
– the dashed line with a price tag is a protective option

I will try to be publishing this trade on a daily basis from Wednesday to Friday during the week when we will have a weekly options trade open against SPX. If there will be no trade open during a particular week, I will not be publishing this chart.

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