Entry Alert - Mini-Sized Dow

By: Patrice Johnson | Sun, Aug 24, 2008
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8/24/2008 1:57:47 PM

Greetings, J.E.D.I.

Welcome to The J.E.D.I. Trader.

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Sell one (1) Mini-Sized Dow 11,600 Call Option (Ticker Symbol: YMU811600C) Limit 231.00

Current Price for the Futures: $11,617.00 for the Futures

Current Price of the September 2008 MiniSized Dow 11,600 Call Option: $231.00

Total Cost

($1,155)

Initial Margin Requirement

$2,919

Maintenance Requirement

$2,335

Total Requirements

$2,919

Estimated Commission

$12.99

Expiration Date of Options Contract: September 19, 2008

Tick Size: 1 point = $5.00

Breakeven Point:

The breakeven point for selling one September 2008 Mini-Sized Dow 11,600 Call Option at $231.00 limit on Monday, August 25, 2008 is $11,825.80 (assuming you get filled at $231.00). That is, this position will begin to lose money if the Mini-Sized Dow closes above $11,825.80 at expiration. (231x5 minus (12.99x2 commissions) divided by 5 tick size + 11,600)

Note: If the September 2008 Mini-Sized Dow 11,600 Call Option closes below 11,600 at expiration (September 19, 2008), you will be able to keep the option premium of $1129.02. (231x5 minus (12.99x2 commissions))

Note: If you sell to open one September 2008 MiniSized Dow 11,600 Call Option (Ticker Symbol: YMU811,600C) and buy to open one September 2008 Mini-Sized Dow 12,050 Call Option (YMU812,050C), your total cost and inital margin requirements would be as follows:

Total Cost

($880)

Initial Requirement

$1,408

Maintenance Requirement

$1,126

Total Requirements

$1,408

Estimated Commission

$25.98

My fellow J.E.D.I.,

Please see the daily and weekly chart for the September 2008 MiniSized Dow below DATED August 22, 2008.

WEEKLY CHART

Summary:

So, sell one September 2008 11,600 Call Option (Ticker Symbol: YMU811,600C) at a limit price of $231.00 AND buy one September 2008 12,050 Call Option (Ticker Symbol YMU812,050C) at a limit price of $55 just in case I am wrong about the bearish direction of the September 2008 MiniSized Dow Index.

Note: Your initial margin requirment will be lower if you do not execute the orders separately but rather as a spread. That is if you simultaneously place one order to sell to open one September 2008 11600 Call Option and buy to open one September 2008 12,050 Call Option at a limit price of $176.00 (the difference between the $231 call option premium for the selling of the 11,600 Call Option and the $55 call option preimum for the purhcase of the 12,050 call Option)

Good Luck!

And may the force of volatility will be with you.

Best Regards,

 


 

Patrice Johnson

Author: Patrice Johnson

Patrice V. Johnson
The J.E.D.I Way

Patrice V. Johnson

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