Trade Placed: Dec 2009

Yesterday, I sold to open 1 Dec 09 1400 put 22% otm. Now that earnings season is wrapping up, I am getting the sense that the market is feeling a bit topped out. The advance since the Nov 2nd low has been on low volume, and I don't see a catalyst for further advance at this time. Todays decline was on heavier volume than on any other day of the recent runup, other than the reversal day on Nov 2nd. The VXN is again at the lower end of its trading range - possibly setting up for a reversal and higher option premiums to be sold. Should a deeper pullback develop in the next few days, I would be looking to sell the 1400 or lower strikes. At this time, I am not planning to buy to close the Dec 1325 put, as it should stay safely otm until expiry in 35 days.

Index level: 1788.31
Sell to open: 1 Dec 09 1400 put
Credit received: 1.50
Initial Margin req.: $13,997.50
Commission: $1.25
Net credit: $148.75
Days to expiry: 36
Simple return: 1.07%
Yield: 10.87%
% to ITM: 21.71%
% Probability of expiring ITM: 2.42%
VXN level: 23.13%
Mmkt equivalent earnings @ 1.30%: $17.93

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

Trade Closed: Nov / Dec 2009

Today I closed a Nov 1400 put for .25 and the Dec 1250 put for .65. These were closed to free up collateral, and in the case of the Dec put, to take profits since the trade had made 82% of the max profit and still had 38 days left until expiry. In most cases, I follow this as a rule - once 75 - 80% of the max profit has been made in a relatively short time, close the trade to free up collateral and take profits, rather than waitng a few weeks to close the trade out for the remaining 20 - 25% of the profit. I do this to avoid locking up collateral for a prolonged period of time - it also allows me to look for another trade to place.

I have entered a gtc order to close the other Nov puts for .05.

Index level: 1762.29
Buy to close: 1 Nov 09 1400 put
Cost to close: .25
Initial Margin req.: $14,010.00
Commission: $1.25
Net debit: $26.25
Profit: $257.50
Days open: 10
Simple return: 1.84%
Yield: 67.09%
% to ITM: 20.56%
VXN level: 23.80%
Mmkt equivalent earnings @ 1.30%: $4.99

Index level: 1768.40
Buy to close: 1 Dec 09 1250 put
Cost to close: .65
Initial Margin req.: $12,495.00
Commission: $1.25
Net debit: $66.25
Profit: $302.50
Days open: 10
Simple return: 2.42%
Yield: 88.36%
% to ITM: 29.31%
VXN level: 23.53%
Mmkt equivalent earnings @ 1.30%: $4.45