Trade Placed: Dec 2009

On Friday I sold to open 1 Dec 2009 1425 put for 1.10. This past Wednesday I had closed out the Dec 1325 put in order to take December risk off the table. At that point I thought I might just let the remaining open Dec 09 1400 put ride as I didn't want to put more risk on the table into year end - why risk it? Then overnight Wednesday doubts surfaced as to whether or not Dubai might default on its debt. Markets in the US were closed Thursday for Thanksgiving, and the foreign markets were beaten down. I was glad I had closed out the 1325 put the day before as I thought if the Dubai issue got messy, the US market could become a safe haven of sorts, and the dollar would rally, driving down the US markets. Pre market futures on Friday in the US were down 50 on the Nasdaq and 300 or so on the Dow. As soon as the US opened however, the markets began to rise. By the end of the day the stock market ended down 154 points (-1.48%) on the Dow Jones and 38 points (-1.73%) on the Nasdaq. European markets had managed to close in the green and recover to their pre Dubai levels. I interpreted this to mean the crisis in the Middle East may not be as serious as people thought. With a 20% rise in the VXN and just 20 days until Dec expiry, I decided to sell the 1425 put (19.35% otm). I wanted to take advantage of the increased premium on 20% otm puts as well as the rate of time decay which will begin to kick in. The NDX is down just about 2% from its most recent highs on Nov 16th – another 5% or so decrease will still leave the index well above the 1425 and 1400 strikes I have sold short for December. In the meantime, I have placed sell to close orders for .05 on both remaining trades.

Index level: 1766.81
Sell to open: 1 Dec 09 1425 put
Credit received: 1.10
Initial Margin req.: $14,265.00
Commission: $1.25
Net credit: $108.75
Days to expiry: 20
Simple return: .77%
Yield: 14.07%
% to ITM: 19.35%
% Probability of expiring ITM: 2.13%
VXN level: 25.13%
Mmkt equivalent earnings @ 1.30%: $10.21

Please view my disclosure on the bottom of this blog!!

Trade closed: Dec 2009

On Wednesday Nov 25th, I closed out the Dec 1325 put for .30. I wanted to take the risk off the table and felt that the cost to close of .30 was well worth it. At the time, the trade had made 93% of its possible max profit. There were 22 days until expiry and didn't want to wait that long to free up my collateral.

Index level: 1793.75
Buy to close: 1 Dec 09 1325 put
Cost to close: .30
Initial Margin req.: $13,250.00
Commission: $1.25
Net debit: $31.25
Profit: $417.50
Days open: 28
Simple return: 3.15%
Yield: 41.07%
% to ITM: 26.13%
VXN level: 21.31%
Mmkt equivalent earnings @ 1.30%: $13.21

November 2009 results:

November turned out to be the most profitable month to date. I attribute this to the late October spike in the VXN which enabled me to sell the Dec 1250 put for a nice premium. Soon after, however, the VXN retreated back to its recent lows and remains stuck at the lower end of its trading range. This limits the premium I can sell puts 20% otm for. I would consider selling puts 15% otm, but with the year wrapping up I am becoming leary of what turn the market may take. I am especially worried about the weakness in the USD and when it may reverse, since the market seems to be rising as the dollar weakens. I think this may mean once we see USD strength, the market may turn lower, becoming uncomfortably close to 15% otm sold puts. However, should the market turn lower in the next few days, I would still look to sell puts 20% otm and possibly some Jan 2010 puts that I would close out when the market rose again. At this point, the premiums available for Dec options aren't high enough to risk selling further options and I would rather close the year with an additional $500 or so from the Dec puts I have already sold.

Trade closed: Nov 2009

Today the Nov 1375 put and one Nov 1400 put were filled at .05 (no commission at TOS) - tomorrow I expect the one remaining 1400 put to be filled as well.

Index level: 1805.80
Buy to close: 1 Nov 09 1375 put
Cost to close: .05
Initial Margin req.: $13,995.00
Commission: $0.00
Net debit: $5.00
Profit: $143.75
Days open: 45
Simple return: 1.05%
Yield: 8.48%
% to ITM: 23.86%
VXN level: 22.71%
Mmkt equivalent earnings @ 1.30%: $22.03

Index level: 1809.55
Buy to close: 1 Nov 09 1400 put
Cost to close: .05
Initial Margin req.: $13,995.00
Commission: $0.00
Net debit: $5.00
Profit: $83.75
Days open: 24
Simple return: .60%
Yield: 9.10%
% to ITM: 22.63%
VXN level: 22.89%
Mmkt equivalent earnings @ 1.30%: $11.96

I have been researching the extent to which each of the previous 7 rallies since May have climbed and it seems that the current rally from Nov 2nd has climbed just under 10% - the average rise being 9.88%. Does this mean the currcent rally is over extended and will soon pullback the average retracement of 6.06%? Possibly, as the low volume that has been driving this rally higher makes the move suspect. The VXN is also back down to the low point of its recent trading range around 23. Potentially, the market could be setting up for another pullback - if this does occur, I will be looking to sell further 1400 Dec puts (or lower) - the 31 days left until expiry will allow for juicy put premiums should the market endure the kind of pullback that occurred at the end of October when the NDX lost 7% in 5 trading days.

Trade Placed: Dec 2009

Yesterday, I sold to open 1 Dec 09 1400 put 22% otm. Now that earnings season is wrapping up, I am getting the sense that the market is feeling a bit topped out. The advance since the Nov 2nd low has been on low volume, and I don't see a catalyst for further advance at this time. Todays decline was on heavier volume than on any other day of the recent runup, other than the reversal day on Nov 2nd. The VXN is again at the lower end of its trading range - possibly setting up for a reversal and higher option premiums to be sold. Should a deeper pullback develop in the next few days, I would be looking to sell the 1400 or lower strikes. At this time, I am not planning to buy to close the Dec 1325 put, as it should stay safely otm until expiry in 35 days.

Index level: 1788.31
Sell to open: 1 Dec 09 1400 put
Credit received: 1.50
Initial Margin req.: $13,997.50
Commission: $1.25
Net credit: $148.75
Days to expiry: 36
Simple return: 1.07%
Yield: 10.87%
% to ITM: 21.71%
% Probability of expiring ITM: 2.42%
VXN level: 23.13%
Mmkt equivalent earnings @ 1.30%: $17.93

Please view my disclosure on the bottom of this blog!!

Trade Closed: Nov / Dec 2009

Today I closed a Nov 1400 put for .25 and the Dec 1250 put for .65. These were closed to free up collateral, and in the case of the Dec put, to take profits since the trade had made 82% of the max profit and still had 38 days left until expiry. In most cases, I follow this as a rule - once 75 - 80% of the max profit has been made in a relatively short time, close the trade to free up collateral and take profits, rather than waitng a few weeks to close the trade out for the remaining 20 - 25% of the profit. I do this to avoid locking up collateral for a prolonged period of time - it also allows me to look for another trade to place.

I have entered a gtc order to close the other Nov puts for .05.

Index level: 1762.29
Buy to close: 1 Nov 09 1400 put
Cost to close: .25
Initial Margin req.: $14,010.00
Commission: $1.25
Net debit: $26.25
Profit: $257.50
Days open: 10
Simple return: 1.84%
Yield: 67.09%
% to ITM: 20.56%
VXN level: 23.80%
Mmkt equivalent earnings @ 1.30%: $4.99

Index level: 1768.40
Buy to close: 1 Dec 09 1250 put
Cost to close: .65
Initial Margin req.: $12,495.00
Commission: $1.25
Net debit: $66.25
Profit: $302.50
Days open: 10
Simple return: 2.42%
Yield: 88.36%
% to ITM: 29.31%
VXN level: 23.53%
Mmkt equivalent earnings @ 1.30%: $4.45

Trade Placed: Dec 2009

On Friday Oct 30th, I sold to open 1 Dec 2009 1250 put for $3.70 at the close. The trade was placed to capture the elevated premium and to sell an option 25% otm. Again, I am not expecting a truly significant market pullback in the coming weeks. I believe this trade will remain otm until expiry. Also, there are multiple levels of support beneath, as well as hungry buyers waiting to get back into the market before year end.

Index level: 1677.13
Sell to open: 1 Dec 09 1250 put
Credit received: 3.70
Initial Margin req.: $12,495.00
Commission: $1.25
Net credit: $368.75
Days to expiry: 48
Simple return: 2.95%
Yield: 22.44%
% to ITM: 25.02%
%Probability of expiring ITM: 4.74%
VXN level: 29.81%
Mmkt equivalent earnings @ 1.30%: $21.35

Please view my disclosure on the bottom of this blog!!