Setting Up a Pair of Shorts

It's getting tough to short today on the SPDR S&P 500 (SPY). The closer it gets to the $154 level, the more apt I am to wait until it closes below $154 or breaks very early in the day before I get aggressively short on the indices. If it moves below $154, then I believe we'll be looking at a quick trip to $152.80; however, it bounced hard off the $154.28 low today, so I do not expect that area to fail easily.

SPDR S&P 500 (SPY) -- Daily Source: StockCharts.com View Chart » View in New Window »

Morgan Stanley (MS) will round out the big banking/brokerage names before trading tomorrow. The options are pricing in about a $1 move from the $21 area; however, the support and resistance levels are about $1.50 from the current price. It's been a mixed bag so far from the financials with actual results a bit better than expected overall, but equity reaction favors the bears. I am going to use a skip-strike butterfly on the downside going with the April 19 $21.5-$20.50-$20 put strikes for about $0.33. I realize my downside target is lower than the $20.50 strike; however, the market is looking better into the afternoon, so I want to give the position some room....166 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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