Trade Placed: Oct 2009

Today I sold to open 2 Oct 2009 1400 puts for 1.15 each, about 19% otm. There are just 24 days until expiry and I wanted to place the trades while there was still a fair amount of premium left to take in. However this trade came at a cost of roughly $28k in margin. Volatility levels still are not providing for larger premiums, but the trade off is a shorter time than usual until expiry.

Index level: 1731.19
Sell to open: 2 Oct 09 1400 put
Credit received: 1.15
Initial Margin req.: $28,010.50
Commission: $2.50
Net credit: $227.50
Days to expiry: 24
Simple return: .81%
Yield: 12.35%
% to ITM: 19.13%
Probability of expiring ITM: 2.29%
Mmkt equivalent earnings @ 1.40%: $25.75

Please view my disclosure on the bottom of this blog.

September 2009 Results:

September ended with another gain even as volatility levels continued to decline. All options were closed out for .05. I wanted to place more trades, but the fear of a suddenly reversing market kept me from doing so. I still believe the market is approaching a critical level where a pullback of 10% or so will occur, especially as the NDX is approaching a multi year congestion area around the 1750 level. The VXN is still bouncing around its mean levels since July, either to go higher or drop back down into pre Lehman channel of 22 to 35. However, any pullback will come with elevated VXN levels as traders look to lock in their profits from the last 6 months. As we approach last Septembers market levels, we should consider if things are really any better than they were before the financial collapse last year.