TIF – Reflection Volatility

Now is the perfect time to sit back and reflect a bit on a trading style. That’s the reason I bought this book by Michael Martin. I like to focus a bit on one or two specific trades/spreads and take some perspective on the environment we’re trading in. It’s an especially good time because it looks like the market (SPY) is trading in the middle of a range.

One of the names I’m concentrating on for this exercise is Tiffany & Company, TIF. I’m watching October expirations and regular readers will have seen the entry on TIF and the follow up.

The context, atleast as I see it:

  • Europe is scrambling and optimism obviously will be short lived and sporadic. This scramble is a good news, it starts to feel Eurocrats are getting the message. What’s interesting to me about Europe is it’s parroting of QE x under vastly different circumstances. The complexity of the problem surpasses my grasp, but I do enjoy observing the parrellels and contradictions. As often the case, the US press is pedalling an end-of-world catastrophy while the European press ruminates over less extreme scenerios. I’m sure the reality lies somewhere between.
  • Copper and Commodities are falling. People are looking for cash?
  • Trends are moving downward on a 3-6 month time scale and surfing a channel on a 1 month time frame.
  • Volatility is holding up over 40. The positive headlines, are having less and less impact.

So back to Tiffany & Co.

It’s fallen about 7% today even on an up day. This trade is working out well so far. The question now is how should I protect my profits? Do I want to add to my position? I’m not ready to close this position because I see some great lower resistance around $57.50.

The 65/55 spread is worth ~ $3.00. I picked it up for ~1.80.

I’m watching 57 and 73 as my exit and bail alarms.