Trade Idea: Oct 2009

I have been watching the Oct 1200 strike to sell. As of today's close it is 25% otm and can be sold for about $1.95 - actually during the day it was as high as $2.65, but the volatility level started to slide and took premium with it. It would yield about 14% - not great, but I am willing to trade that the NDX isn't likely to tumble 25% in the next 6 weeks. I didn't sell it today as the unemployment report comes out tomorrow morning. This week it seems that the market is reacting poorly to better economic news - the ISM reached above 50 and a somewhat better ADP jobs report was released (however I think that even though fewer jobs are being lost, they are still being lost). Many are calling for the unemployment rate to jump higher to 9.6%, but remember last month the rate actually fell (although it fell not because more people found jobs, but because their benefits ran out and they were no longer included in the official number). Should a worse than expected report come out, the VXN will spike higher, increasing the premium I can sell the 1200 put for. If a stronger report comes out, I may wait until after the holiday to sell put options - of course at that point I will wish I had just sold the 1200 for $2.65 today.

As for the options I am still short which expire in 2 weeks, the Sep 1300 is 19.05% otm and the 1250's are 22.17% otm - I have my buy to close on them for .05. Once the 1250's are bought back, it will free up the $25k in margin which I can put to work in Oct options. The net pnl for the month will be about $560.00 - the second best month so far.