Closed EEM Puts Position

I held onto my EEM position far longer than I should’ve, but wanted to keep some international exposure.  I got over that this afternoon when its melt lower turned into nose dive.  In late December 2010 and again in late January 2011 I sold EEM naked puts at the January 2012 $50 strike.  I brought in $704.29 and $668.99 respectfully.  This afternoon while EEM was trading at $37.86 I bought to close two EEM January $50 puts for $12.65 each and paid $2530.68 after commissions.  This gave me a realized loss of $1,157.40 and now I’m locked out of the ETF for a month due to the wash rule.  I’m not worried about the block from EEM since there are so many other stocks and ETFs I can use to add more exposure in a turn around.

I almost didn’t make this trade today, but saw the sell-off building steam and wanted to save something.  I thought about selling other parts of my portfolio, but thought I should wait until tomorrow to see if we get one of those bounces that often comes the day after a big sell-off.  A lot of times the market will sell on the news for any Fed statement and then overnight the mood shifts to thinking maybe it’s good for stocks.  I’m not convinced this will be one of those days.

Looking at the S&P 500 chart, I could see support surface after another 14-15 points lower, maybe around 1,150.  That marks the trend line of higher lows since August.  On the other hand, it looks like we’re about to see a bearish crossover of the 10 day moving average below the 20 day moving average.  That tends to spell trouble for the index, but it might not be too bad quite yet with potential support from August lows so close below.  You know it’s been a crazy market when 64 $SPX points is considered close by.  5% just isn’t what it used to be.  If 1,150 breaks support I might not sell my long SSO positions, but could open a long position on SDS (the short equivalent of SSO) for a quick trade.