Weekly Recap: 3/02/09 - 3/06/09

Weekly Range:

• Open 109.90


• High 112.47


• Low 104.37


• Close 106.47


• % Change from last week close -4.68%
  

MNX closed down roughly the same percentage as last week, but still managed to hold above the November intra day low of 101.89. The VXN still is having problems getting out of the upper 40's, pointing to complacency in the market and possibly another week of a slow bleeding to come. The short March 84 strikes are still 21% otm with 12 days remaining until expiration - there are also 40 days until April expiration, so I am starting to look at selling April strikes.

Trade Placed: March 2009

Today's trading was range bound. I didn't get the sell off on the open I hoped for and the VXN was slowly bleeding out, taking the higher premiums along with it. With only 16 days until expiry, its the time where premium, volatility, and time decay all battle it out. If I didn't place a trade today, and the market were to rally or remain flat, there wouldn't be any premium left in the options to make them worth selling, or any worth selling would be closer to the money than I would like. Since the MNX managed to stay in the green today, I placed the trade at the close and got filled at a slightly lesser premium than the other 84 strike trade from last week (.17 vs. .19). The trade is still 22% otm, so I feel it's still a safe play.

Index level: 108.06
Sell to open: 10 Mar 09 84 Puts
Credit received: .17
Initial Margin req.: $8,430.00
Commission: $12.50
Net credit: $157.50
Days to expiry: 16
Simple return: 1.87%
Yield: 42.62%
% to ITM: 22.27%

Please view my disclosure on the bottom of this blog.

Trade Plan: March 09 Puts

Market volatility increased today as the VXN jumped 12.46% higher and the MNX lost 4.03 points, (3.61%) to close at 107.67. The need for the government to keep bailing out the financials is undoubtedly contributing to the poor mood of the market. However, traders can take this time as an opportunity to profit. The March 84 puts I sold last week for .19 can now be sold for .24 - (.18 bid x .30 ask) - or 26% more in premium. This is roughly a 2.71% simple return or 61.78% yield on $8,400.00 in margin for the next 16 days! The 84 strike is still 22% otm and the MNX is approaching support at the 102 level. Tomorrow, I will look to sell another 10 lot on the March 84's or lower depending on how the market opens. I am still looking to keep my short options at least 20% otm. Listening to tonight's financial shows, it seems there is some agreement that the market is oversold and a bear market rally is not out of the question. That would work out perfectly for the short puts - the market would rally and drive down the premium left in the puts right before expiration, safely putting them further in the clear.

Marks as of 4:00 pm (MNX = 107.67)
87.50_.40
85.00_.31
84.00_.24
82.50 _.22
81.00 _.21
80.00 _.16

Please view my disclosure on the bottom of this blog.