Trade Placed: Dec 2009

On Friday Oct 30th, I sold to open 1 Dec 2009 1250 put for $3.70 at the close. The trade was placed to capture the elevated premium and to sell an option 25% otm. Again, I am not expecting a truly significant market pullback in the coming weeks. I believe this trade will remain otm until expiry. Also, there are multiple levels of support beneath, as well as hungry buyers waiting to get back into the market before year end.

Index level: 1677.13
Sell to open: 1 Dec 09 1250 put
Credit received: 3.70
Initial Margin req.: $12,495.00
Commission: $1.25
Net credit: $368.75
Days to expiry: 48
Simple return: 2.95%
Yield: 22.44%
% to ITM: 25.02%
%Probability of expiring ITM: 4.74%
VXN level: 29.81%
Mmkt equivalent earnings @ 1.30%: $21.35

Please view my disclosure on the bottom of this blog!!

Trade Placed: Nov 2009

On Friday Oct 30th, I sold to open another Nov 1400 put for $2.85. With the huge pop in the VXN (+ 17.36%), I definitely wanted to take in the premium available, and set to expire in 20 days. I believe that the run-up in the volatility level, while both expected and rational, is a little overdone. As I said in a previous post, it isn't like last September when the world was facing a financial crisis of unknown proportions. The market has simply had an un-supportable runup in economic expectations which are beginning to show that they were unfounded. Exactly where is the economic growth going to come from now that cash for clunkers is over and the economic stimulus is not doing much to either preserve or create new jobs.

In the short term, I expect another day or so of market turmoil, and then a gradual decrease in the VXN and a leveling out to gradual decline in the market. I do think we are headed lower, but at a slower pace than the last few days. Then I expect a run up into year end as investors on the sidelines put their money back to work in names that are 10% lower than they were just last week.

Index level: 1677.35
Sell to open: 1 Nov 09 1400 put
Credit received: 2.85
Initial Margin req.: $14,010.00
Commission: $1.25
Net credit: $283.75
Days to expiry: 20
Simple return: 2.03%
Yield: 36.96%
% to ITM: 16.03%
%Probability of expiring ITM: 4.84%
VXN level: 29.58%
Mmkt equivalent earnings @ 1.30%: $9.95

Please view my disclosure on the bottom of this blog!!