Trade Placed: June 2009

Today, I sold to open 1 NDX June 1550 call, 10.66% otm. I decided to sell the call option at the close when it became clear that the market was ending the day near its low - showing that sellers wanted out. Hopefully, the downward trend continues and the call remains otm. I may look to close the trade for .05 or less, as I hate to get whipsawed out of calls that were close to itm when they were sold. Current support levels are at 133-135 and again at about 129 and resistance is at the recent highs of about 143. The margin requirement for this trade is quite low as my broker ThinkorSwim considers both the 1050 put and this 1550 call as a strangle, thereby reducing the margin required for this trade. I am still looking into selling another put strike around the 110 level (21.5% otm) - should the downtrend continue tomorrow, I can probably get .15 or so for a 24.5% yield if held until expiry.

Index level: 140.07
Sell to open: 1 June 09 1550.00 Call
Credit received: 1.65
Initial Margin req.: $3,528.50
Commission: $1.25
Net credit: $163.75
Days to expiry: 22
Simple return:4.64%
Yield: 76.99%
% to ITM: 10.66%
Probability of expiring ITM: 4.82%

Please view my disclosure on the bottom of this blog.

Trade Idea: June 09 Puts / Calls

There are only 24 days until June expiry, and I don't think that option premiums may increase enough to make it worthwhile placing another put trade. I have been looking at the 1100 (110) puts for .15 or so. The NDX has a tighter spread, while the MNX bid / ask is too wide. They are app. 22% otm - which is usually far enough out of the money, but I am afraid of a reversal which may take the index down uncomfortably close to the 1100 (110) strike. On the call side, thinking that the index is due for a breather, the 1550 (155) calls can be sold for about .23 and are 10% out of the money. I typically don't like placing call trades because in order to bring in enough premium they have to be sold much closer to the index than I like.

Technically speaking, the index is bumping up against its previous high of 143 and is still hovering around its 200 dma, unable to strongly advance above it, so some sort of pullback may be coming. The question is how soon and will it increase premiums enough.