I wrote to my forum (http://options.forum2u.org/) about 10 days ago and recommended readers to cover long position (Options Spread – Bull Put) since SPY would break down SPY 135, which was the support line. My argumentation was the fluctuation of Oil price during the past weeks and SPY experienced lower high and lower low on technical indicator.
On my surprise, the VIX did not get higher despite the downturn and writing options was not my strategy on this situation. It was very hard for me to find acceptable risk-reward on writing options since market was fluctuated but the VIX was low. Since the implied volatility/options premium that market maker priced did not corresponding with the actual situation….. so it was time for me to step aside (I converted most of my position to cash).
Up to this writing, the index has been depressed for 4 days in a row. It was really bearish condition and it could reach the lowest point SPY 126 like in November 2007. My advise is don’t take any bottom before a good technical indicator confirmation. To know this, I would look at multiple time frames graph and ensure there is no conflict one to the other. I also usually look for good stocks that depressed obecause of negative news and fears surround the whole situation. If the VIX is not so high, buying long term Options with deep in the money can be a choice (this will show you that an Options Writer can also do straight Buy Options to leverage profit).
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