Trade Alert: Trimming some puts

“Capitulate and fade,
Resurrect and break” — Smashing Pumpkins

The DJIA is down 550 points and stocks across the board are being sold hard. I’m not sure I’d call it a full-on capitulation day, but it’s certainly getting to be capitulative. Why isn’t “capitulative” a word? How about “capitulatory”? Ah, there it is.

Anyway, when there’s some capitulation, as there is some here this afternoon, it’s usually a good time to do a little covering or nibbling or trimming some of your put hedges.

And that’s what I’m going to do now here with the Nasdaq 2.7% and the QQQ’s down 8% since we bought our last tranche of QQQ puts.

So I’m selling about 1/5 of my QQQ and SPY puts right now, locking in some profits on these hedges. Letting the rest ride for now.

It’s no time for heroes as markets capitulate and fade. But it’s no time for cowards as the markets are likely to resurrect before they break.