To OTC Journal Members:
 

Short, and Getting Shorter

Here's an update for those who have been following my latest trade on the NASDAQ 100. I jumped into QID a couple of weeks ago on the premise the market was due for a correction, and the NASDAQ 100 would participate in a big way. QID is an ETF that trades inversely to QQQQ- the ETF for the NASDAQ 100. If QQQQ goes up, QID goes down, and vice versa.

I picked up 2,000 shares at $38.67, and have now been in and out of the money three times in a rather trendless but fairly volatile market. The market appears pretty strong right now, so this could be a fool's errand that will cost me some money. However, after two months of pretty uninterrupted appreciation, I felt like the market was ready to cool off for a bit.

Today, on a rally in the QQQQs, I piled in a little deeper. QID closed at $35.53 today, so I'm down about $4k there. However, this security has no problem swinging a point or two in a day or two, so I'm not too concerned.

Here's a chart of the QQQQs. There's a couple of things I like which suggest a move to the downside. First, today's move represented a double top from the high made a few days ago of $50.47.

Secondly, QQQQ has come back up an filled two gaps left from back in December and January. I know they're hard to see on the chart, but I didn't want to make it too big.

I hoping the upside in the market is exhausted right now, and sellers will surface going into the weekend. I haven't set my stop loss yet, but will look to do so if the market chugs much higher from here. Of course, I could be totally misreading this, and the market could simply power higher.

Today, just before the close, I added 50 July 50 QQQQ puts at $1.27 to my account. I was looking at the QID calls, but they had a bigger premium, so I went with the QQQQ puts.

On the option trade, I'm not going to be looking for a huge move- it's a $6400 additional investment, and if I can scalp a few thousand dollars out of the trade I'll be happy. It will lower my cost basis on the QID position. If it moves the other way, I might choose to liquidate those options fairly quickly, take my loss, and get out.

This trade is testing my patience a bit. This trendless market is tough, with the dollar falling a bit today and oil up $5, it seems like a correction might be imminent.

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