Trade Placed: Oct 2009

Yesterday I sold to open 1 Oct 1300 put for 1.55 with 35 days until expiry. I feel we are close to a breakdown in the NDX, but wanted to place a trade to take in the premium available at that time, and still with more than 30 days until expiry. I hadn't placed the trade earlier because I want to avoid selling a put for "x", then seeing several days later the market has declined, the VXN has risen, and the same put can be sold for "2x" - still safely 20% otm, but now worth twice as much. At some point the market will pull back and richer premiums will be available. Since there are close to 30 days left until expiry, time decay will start eating away at the put premiums available for 20% otm options, so I placed 1 trade and hopefully will be able to sell several other strikes as the market pulls back.

Index level: 1685.46
Sell to open: 1 Oct 09 1300 put
Credit received: 1.55
Initial Margin req.: $12,997.50
Commission: $1.25
Net credit: $153.75
Days to expiry: 35
Simple return: 1.18%
Yield: 12.34%
% to ITM: 22.87%
Probability of expiring ITM: 2.43%
Mmkt equivalent earnings @ 1.40%: $17.42

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