Weekly Recap: 3/09/09 - 3/13/09

Weekly Range:

• Open 105.89
• High 117.05
• Low 104.05
• Close 116.85
• Point change +10.38
• % Change from last week close +9.75%
  

MNX rallied for the week and managed a respectable gain. However, is this just a bear market rally that will be beat back down in the coming week? After a 4 day 10% rally, the market no doubt will be looking for a rest and does anyone really believe that we have seen the absolute bottom of this crisis? Hardly! Since I am short puts for March and April, the week's gain has helped the puts to lose value (resulting in profit for me). While this is just what I want to happen, it has also decreased the premium I could receive for other April strikes. The VXN has dropped about 14% on the week, decreasing the premium available on put options. However, the VXN is sitting right on its 200 day moving average that its held above since September, so I think it may attempt a rally next week. Also, in the coming week I will look to sell more April puts. There are only 33 days until April expiration, so now is the time I prefer to place trades since time decay will soon kick in, eating away at the premium of the put options. I still want to keep the short strike about 30% otm, so as of today I would look to sell the April 85 strike for about .22. If the market should start the week out on a down note, I would look to possibly sell a lower strike depending on the premiums available.

The March options I sold have only 5 days left until expiration and I expect to keep the full premiums I have received for them. If so that will make month 2 of gains for this strategy - I just wish I would have sold more of them!

Trade Placed: April 2009

Today I sold April puts. The market finally has gotten its rally and the lack of any movement in the VXN the past few weeks made me place the trade before the 75 strike lost too much of its premium. If the market continues on its upward path or remains about where it is now, these puts should remain safely out of the money. I sold 15 contracts, rather than the usual 10, because the 75's were so far out of the money.

Index level: 108.36
Sell to open: 15 Apr 09 75 Puts
Credit received: .24
Initial Margin req.: $11,265.00
Commission: $18.75
Net credit: $341.25
Days to expiry: 37
Simple return: 3.03%
Yield: 29.88%
% to ITM: 30.79%
Probability of expiring ITM: 3.75%

Please view my disclosure on the bottom of this blog.

Weekly Recap: 3/02/09 - 3/06/09

Weekly Range:

• Open 109.90


• High 112.47


• Low 104.37


• Close 106.47


• % Change from last week close -4.68%
  

MNX closed down roughly the same percentage as last week, but still managed to hold above the November intra day low of 101.89. The VXN still is having problems getting out of the upper 40's, pointing to complacency in the market and possibly another week of a slow bleeding to come. The short March 84 strikes are still 21% otm with 12 days remaining until expiration - there are also 40 days until April expiration, so I am starting to look at selling April strikes.

Trade Placed: March 2009

Today's trading was range bound. I didn't get the sell off on the open I hoped for and the VXN was slowly bleeding out, taking the higher premiums along with it. With only 16 days until expiry, its the time where premium, volatility, and time decay all battle it out. If I didn't place a trade today, and the market were to rally or remain flat, there wouldn't be any premium left in the options to make them worth selling, or any worth selling would be closer to the money than I would like. Since the MNX managed to stay in the green today, I placed the trade at the close and got filled at a slightly lesser premium than the other 84 strike trade from last week (.17 vs. .19). The trade is still 22% otm, so I feel it's still a safe play.

Index level: 108.06
Sell to open: 10 Mar 09 84 Puts
Credit received: .17
Initial Margin req.: $8,430.00
Commission: $12.50
Net credit: $157.50
Days to expiry: 16
Simple return: 1.87%
Yield: 42.62%
% to ITM: 22.27%

Please view my disclosure on the bottom of this blog.

Trade Plan: March 09 Puts

Market volatility increased today as the VXN jumped 12.46% higher and the MNX lost 4.03 points, (3.61%) to close at 107.67. The need for the government to keep bailing out the financials is undoubtedly contributing to the poor mood of the market. However, traders can take this time as an opportunity to profit. The March 84 puts I sold last week for .19 can now be sold for .24 - (.18 bid x .30 ask) - or 26% more in premium. This is roughly a 2.71% simple return or 61.78% yield on $8,400.00 in margin for the next 16 days! The 84 strike is still 22% otm and the MNX is approaching support at the 102 level. Tomorrow, I will look to sell another 10 lot on the March 84's or lower depending on how the market opens. I am still looking to keep my short options at least 20% otm. Listening to tonight's financial shows, it seems there is some agreement that the market is oversold and a bear market rally is not out of the question. That would work out perfectly for the short puts - the market would rally and drive down the premium left in the puts right before expiration, safely putting them further in the clear.

Marks as of 4:00 pm (MNX = 107.67)
87.50_.40
85.00_.31
84.00_.24
82.50 _.22
81.00 _.21
80.00 _.16

Please view my disclosure on the bottom of this blog.

Weekly Recap: 2/23/09 - 2/27/09

Weekly Range:

• Open 118.01


• High 118.38


• Low 111.22


• Close 111.70


• % Change -4.75%

MNX closed on its low for the week which is never a good sign and may point to further selling to come. The next area of support is the 101 area, or about 10% lower (this is also the area of the November lows). As Monday may be a volatile day due to the index closing on its low, I will look to sell a few more February options before theta makes them no longer worth selling.

Trade Placed: March 2009

The market opened up higher today, removing much of the premium the MNX puts received yesterday. I waited to see if the index would break through its intra day resistance level of 115.50 before placing the trade. With the index rising, it was hard to get a fair fill on the trade, but I got filled as follows:

Index level: 115.37
Sell to open: 10 Mar 09 84 Puts
Credit received: .19
Initial Margin req.: $8,450.00
Commission: $12.50
Net credit: $177.50
Days to expiry: 23
Simple return: 2.10%
Yield: 33.33%
% to ITM: 27.19%

I would have liked to sell the 82.5 strike or lower, but the premiums they were selling for today didn't make them worth trading. The market bounced from its oversold level today - hopefully it will last a few days. Bernanke calmed the markets by saying the banks wouldn't need to be nationalized and tonite Obama gives his unofficial State of the Union address. I am sure today his staff was busy removing words like catastrophe, depression, armageddon, and clusterf$&k from his speech - hopefully he's learned his lesson and will try to present a more hopeful outlook on the economy. With limited time left until expiration, and theta taking over, it may not be possible to sell more March puts that are comfortably both far enough out of the money and bring in enough premium at the same time. I may look into selling more of the 84 puts, depending on how the market behaves in the next few days (how many 1 day gains were taken back in a day or so in the past...). There is still a week or so before I would consider selling the April strikes as I dont like to leave too much time on the table in case market volatility increases again - the April 75's look nice.....................

Please view my disclosure on the bottom of this blog.