Trade Placed: July 2009

Today I sold 1 NDX July 09 1100 put. I placed the trade with 38 days remaining until expiry to capture the increased premium of an option 38 days out and 25% otm. In the short term, I don't believe that volatility will increase enough to make shorter dated options worth selling. I still have not rolled the June 1550 call I sold - today's market started out weak, but once again, any and all weakness is being bought. Tomorrow, the treasury is issuing 4 week and 3 year securities to fund the huge deficit being created - I expect that if the auction is received poorly and rates climb again, the market will sell off. In the short term, rising rates will only cripple the governments plan to help people refinance at lower rates - in just the last week or so, mortgage rates have climbed nearly a percent (or 25% in terms of its change). What will happen when the bulk of the option ARMS start re-setting? And for a follow thru, 10's are being auctioned Wednesday and the all important 30's on Thursday............hope China brings their wallet............

Index level: 1476.05
Sell to open: 1 July 09 1100 put
Credit received: 2.30
Initial Margin req.: $11,505.50
Commission: $1.25
Net credit: $228.75
Days to expiry: 38
Simple return: 1.99%
Yield: 19.10%
% to ITM: 26.10%
Probability of expiring ITM: 2.97%

Please view my disclosure on the bottom of this blog.