Days Like Today Validate Why I Don't Like Bull Put Spreads In Overbought Markets - JPMorgan Chase (NYSE:JPM)

As I prescribed in last weekend's Market Recap: 2012 Starts With A Roar, Ends With A Whimper, being short put spreads is a losers game in thin volume overbought markets.

Everyone expected JP Morgan (JPM), the best bank on the block, to hit it out of the park with earnings and outlook. Earnings were ok but the outlook was dismal. This does not bode well for the rest of the financials soon to report earnings.

Nobody has been talking about the forthcoming Euro-land credit downgrades which are finally coming to the forefront today: Germany Said to Keep AAA; France, Austria Risk Cut.

The items stated above took Friday's market by surprise; although it shouldn't have, but it did. The result was a nice, but "unexpected" pullback. I have been aware and cautioning about such an event which is why I have been issuing Bear Call Spreads in both Trading Services. The downward action set up our Monthly Trading Service positions nicely going into a shortened trading OpEx week next week.

I would rather be conservative and make nice "little" profits like this week's Weekly Trading Service RUT trade yielding +7.53% in 4 days than chasing returns and taking undue risk like Bull Put Spreads in this trading environment. Remember: Live to trade another day, and sometimes the best trade is the one not made.

Navigate wisely and stay profitable, my friends. Happy trading!

+72.33% 2011 BookingAlpha Monthly Advisory

+42.22% 2011 BookingAlpha Weekly Advisory

vs.

-0.01% 2011 S&P 500

See Trading Record

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