In last Monday’s Dark Pool Trader Weekly Review, I was very bullish on the SPDR S&P 500 Trust (SPY) above $385. Indeed, it rallied all the way up to $395 last week.
Then on Thursday, May 11, we got a massive 13 million-share print on the SPY at $389.50. So this week for the SPY, I am bullish above $395 and bearish below $385.
But before that comeback, the SPY had a turbulent few weeks… and we capitalized on that.
The last quarter of the SPY Debit Put Spread that we initiated on February 25 expired this past Friday, but we made some very nice profits on three fourths of that trade.
On February 26, we closed the first half of this debit put spread for 105% gains. And then on March 4, I recommended taking 140% gains on another quarter. That puts our total gain on that trade at 87.5%.
QQQ Debit Put Spread
For the past few weeks, we’ve been looking at some very heavy Dark Pool prints coming in on the Invesco QQQ Trust (QQQ), the Nasdaq 100 ETF. Then, this past Friday, we got the biggest levels in months.
On March 12, we got a record 8.7 million shares of the QQQ printed at $318.23.
This week for the QQQ, I am bullish above $320 and bearish below $310.
On the morning of March 4, I recommended a $301/$299 QQQ Debit Put Spread. Later that same day, we closed out half of that trade for 65% profits.
And then on March 5, I recommended selling another quarter of our debit put spread on the QQQ if it hit $1.
While this spread trade came very close at $0.91, it looks like we’ll miss ever hitting that target. And the trade could expire worthless this Friday.
However, when it comes to trades like this, if you’re ready to go out on your own some, I want to share with you a little trick I do. Traders can get a few more cents on each of my spread trades when they use this strategy while exiting.
You can see on the chart below the spike in the QQQ March 19 $301 Put Options this spread’s long leg, went up to $10.29.
At the same time, the QQQ March 19 $299 Put Options, the trade’s short leg, went up to $9.38 at the high.
While I always like to enter into the spread trade at the same time, I like to leg out into strength on the way out.
I always get out of the short leg first, buying to cover. Usually in the next 20 seconds to a minute or two, I get out the long leg, selling it to close.
Remember, the key to this strategy is getting out into strength of the spread – in this case while the QQQ is moving down. Let me show you example of this.
In the QQQ chart below, I would buy to close (BTC) the $299 puts as it was breaking below $301, and sell to close (STC) the $301 puts as the QQQ was touching down at $300, which is a major level where computers are going to buy. You can not wait until the stock bounces up. You must get out of the long leg while it is still going down.
You have to be very aggressive to trade this way, knowing where your major levels are. You never want to get out of the long side first, because you will find yourself naked in this option, which is dangerous.
This is a strategy that took me a few months to master. So if you’re going to try this out, I suggest paper trading until you master it.
MRO Puts
Last week, we got more massive Dark Pool prints on energy.
The one I saw as on the Energy Select Sector SPDR Fund (XLE). Check out this 10 million-share print at $53.06.
Here are the top holdings for this ETF.
For Exxon Mobil Corp. (XOM), I am bullish above $62.50 and bearish below $60, which is where it headed this morning.
When it comes to energy, I like to trade Marathon Oil Corp. (MRO). Its options are much cheaper than Exxon’s.
For MRO, I’m bullish above $12.50 and bearish below $12.
Earlier today, we took advantage of this opportunity by buying the Marathon Oil Corp. (MRO) March 26 $11 Put Options. I look forward to seeing what that trade does.
And I look forward to the volatility this week off the massive Dark Pool prints that have been coming in.
In addition to the QQQ Debit Put Spread I discussed above, we have a number of trades expiring this Friday. So I will send out a separate email alert on those at the end of the week.
Happy trading,
Stefanie Kammerman,
Editor,
Dark Pool Trader 
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