About once a year circumstances present that make it a good idea to remind all traders of the market's circuit breaker thresholds. Japan was down 12.4% overnight, while US markets are down "only" about 2% going into the last hour of trading. For comparison, in 1929 the Dow was down 21% over two days and in 1987, the Dow was down 21% in one day. Time for a review. Circuit Breakers The U.S. stock market has three circuit breaker thresholds that halt trading when the S&P 500 index declines by a certain percentage from the previous day's closing price: Level 1: A 7% decline triggers a 15-minute trading halt, unless the market drops 7% again within 35 minutes of the closing bell. Level 2: A 13% decline triggers a 15-minute trading halt. Level 3: A 20% decline ends trading for the day. The markets calculate these triggers daily and can be triggered multiple times during periods of market volatility. When triggered, circuit breakers halt trading in all symbols on US equity exchanges, stock options, and some index-related symbols on futures exchanges. ----- Trading options can be problematic when markets approach the above circuit breaker thresholds. That's why we buy Sep 20th monthly expiration options in July. If thinking about taking profits and/or rolling over into new strikes or expirations, do so in the calm of a boring time frame, not when half the major brokerages are experiencing technical difficulties. ----- DJI Watch for a breakdown below today's Opening Dow low to start a full fledged run for the exits leading into the climatic triggering of circuit breakers. ----- QQQ 120 Minute Note: Wave v (circle) comes in around 350-360 and expected between Labor Day and Sep 20th options expiration. ----- Trade Management No need to do anything here, +500% in three weeks. Assuming at some point that those circuit breakers do kick in, which puts do you want to be holding? Answer: It doesn't matter, as long as you are holding puts. The rollover candidate from the Weekend Update (@ 4.86) is below and still buyable and could even be cheaper by the time the next leg down begins Consider rolling over in 1/3's, i.e., 1/3 profit taking, 2/3 into the more leveraged put...or do nothing, just hold the $450's into Labor Day and/or beyond. ----- QQQ Sep 20th $400P ----- The Sep $400P opened today at 17.48, now at 8.80; it will be worth $50+ if QQQ falls to $350 before Sep 20th.
