Got filled on a 28/29 March Bear Call Spread for a credit of .18.
Rationale = Option pricing suggests over a 77% probability the XLF will close below 28 before March expiration. We will take advantage of time decay and buy back the spread no later than the Friday before expiration.
Fibonacci Retracements and the moving averages provide the relevant support/resistance targets.
The 8ema has crossed the 21ema on a daily chart, which I view as bearish. The 50% retracement of the move from 24.11 to 29.93 comes in at 27.02; the 38.2% comes in at 27.71; the 25% comes in at 28.48. The XLF has penetrated each of these levels on its way down to 26.17, so the former support at these levels should now act as resistance.
The 55 ema on a daily chart comes in at 27.71 and the 100 ema comes in at 29.24. Also, the XLF has been unable to close above 28.50 since the first week of March.
Fundamentally, the financials lack transparency and harbor unknown risks related to complex derivatives for the near futures. Write-downs continue . . .
This trade makes the maximum of $180 if the XLF stays below 28.27. Again, we will take profits before expiration week so we will not capture all the premium. Maximum risk is potentially $820 if the XLF rallies above 129.