SPDR S&P 500 (SPY)

[Perseverance71]

Good idea. I've spoken out against averaging down on options, but I'm realizing that with the volatility we've been seeing, the sharp swings in both directions, that if employed correctly it could be an effective strategy.

On friday, midway through that option expiration manipulated rally to 194, I loaded some puts, then watched helplessly as they drove it higher. As monday unfolded, and spy continued to climb, I felt confident that it was a headfake, so kept holding my puts, which ended up down 50% from my entry EOD monday. If I had of just bought more at half the price, and kept holding, confident spy would reverse for a trip back down, I would of done alot better. I sold the next day for a 10% loss on the puts, but could of been green had I took a small position at a much lower price.

A good strategy could be to buy both calls and puts and look to sell one side as spy moves in that direction, average down on the other side at a specific point, then sell the other side when spy moves in the opposite direction. Rinse and repeat as the trend allows. Harder than it sounds, but possible. I wouldn't do this with weekly options but options at least 2 months out as that saves you from the quick decay of short term options. As long as SPY doesn't spend an extended time going in one direction, it would work.