Trade Placed: Aug 2009

With INTC's blowout earnings last night and today's rally in the markets, the volatility level has been whacked down to its lowest level in a year (25.28). I was able to sell the 1200 strike (20% otm) for just shy of 2 bucks. The NDX is hovering right at its recent highs so I believe it will either break higher in the coming days (depending on the general attitude towards the earnings reports) or come back in due to the resistance that these levels represent. Either way, there are now defined areas of support and resistance to rely on (1500 res. / 1400 / 1350 supp.). In the coming days I will look to place more put trades, hopefully for more premium if the VXN level increases.

Index level: 1497.60
Sell to open: 1 Aug 09 1200 put
Credit received: 1.95
Initial Margin req.: $12,105.00
Commission: $1.25
Net credit: $193.75
Days to expiry: 36
Simple return: 1.60%
Yield: 16.23%
% to ITM: 19.87%
Probability of expiring ITM: 3.59%
Mmkt equivalent earnings @ 1.55%: $18.51

Please view my disclosure on the bottom of this blog.

July 2009 Results:

I am pleased with the July results as I managed to bring in the largest premium amount so far. I contribute this to the fact that 4 trades were placed instead of the usual 2 or 3 and to the large premium received from the 1200 strike put which brought in $322.50. The timing of this trade was particularly good as I managed to place the trade just as the VXN level increased, capturing the increased premium, and closed the trade 9 days later once 75% of the max profit was achieved. I chose to close the trade at this point because the strike was the closest to the money, and remembering that this trading strategy is "low risk", closed the trade once 75% max return was achieved, thereby locking in the quick profit and removing the trades risk.

As I stated in my previous post, earnings season is underway and I expect a rise in the volatility level, increasing the put premiums for August. It seems the market in general is beginning to accept that the economic recovery is further off than the "green shoots" predicted. Hopefully the earnings reports back this up, and the market turns down. I had spoken about selling the Aug 1125 put for about 4.40, but with today's decrease in volatility it now trades for only about 1.90. It is still comfortably 22% otm, so tomorrow I may try to sell it for 2.00 on any uptick in volatility.

Trade Closed: July 2009

Today, I closed the remaining July trades for .05 each, removing the risk involved in each (no commission charged by ThinkorSwim).

Index level: 1405.00
Buy to close: 1 July 09 1025 put
Cost to close: .05
Initial Margin req.: $10,255.00
Commission: $0.00
Net debit: $5.00
Profit: $98.75
Days open: 27
Simple return: .96%
Yield: 13.02%
% to ITM: 27.05%
Mmkt equivalent earnings @ 1.55%: $11.76

Index level: 1405.00
Buy to close: 1 July 09 1125 put
Cost to close: .05
Initial Margin req.: $11,237.50
Commission: $0.00
Net debit: $5.00
Profit: $188.75
Days open: 31
Simple return: 1.68%
Yield: 19.78%
% to ITM: 19.93%
Mmkt equivalent earnings @ 1.55%: $14.79

Index level: 1405.00
Buy to close: 1 July 09 1100 put
Cost to close: .05
Initial Margin req.: $11,505.50
Commission: $0.00
Net debit: $5.00
Profit: $223.75
Days open: 35
Simple return: 1.94%
Yield: 20.28%
% to ITM: 21.71%
Mmkt equivalent earnings @ 1.55%: $17.10