Using Put Ratio Backspreads at Possible Market Tops

After last weeks post about important resistance I received many questions about how I am trading this.  I do not like to make pure directional plays before a move is confirmed and the possible tops in many markets are not confirmed even though FibGrid shows them to be occurring at key resistance levels.  One of the strategies I like to use in these situations is put ratio backspread.

The video below covers how I use these spreads and the trade that I put on in this situation.  Please keep in mind that this is an educational video and not a recommendation to buy or sell any security.  While the intent of this type of option strategy is to minimize losses if I’m wrong, I’m using it because of the significant potential that I may be wrong and may lose lose money.  Therefore it is important that you independently assess this (or any) strategy for it suitability for your circumstances.  While these are important disclaimers for me, please also take it as good advice for you and don’t trade anything you don’t fully understand.

Remember, that one element of the case to get short came from FibGrid and I will be using that as an important indicator as I track prices and decide whether to hold, exit, or modify my position.  If you don’t already have it, I recommend you take a look at my favorite indicator.