9/12/2008 9:07:57 PM
The system remains in Sell mode.
On August 15 we sold a half position in an SPX Sep 1395(SXYIS)/1405(SXZIA) Call Option Spread for a net credit of $0.60. (This was done through Interactive Brokers, The auto trades didn't get a fill on this occasion)
On August 18 we sold a full position in an SPX Sep 1195(SPTUS)/1185(SPTUQ) Put Option Spread for a net credit of $0.90
The premium received now is $120 per $1,000 of margin required per spread.
SPX Chart - Bigger Picture
While it was a wild week, we're still in a sideways pattern. The 1240 level is holding for now.
SPX Chart - Shorter Picture
Well, another amazing week and the markets behaved like a loose canon, one thing's for sure, both bulls and bears are scratching their head at this point. Monday started with a boom out of the blocks as the Fannie/Freddie deal hinted that the worst was behind us and volumes exploded but by Tuesday, the voice of reason (or most likely fear) came in and wiped off all the gains plus some. Wednesday was breather day, Thursday was, "ok, maybe we've over reacted now" and Friday was "hmm.. maybe we can start to dip our toe in the water again".
For next week, a close above 1265 will be a positive mover in the short term and the indicators show that there's a good chance of that happening. Having said that, there's substantial resistance above 1265 and so we'll probably gyrate some more between 1240 and 1265.
Support is 1215 - 1200 and resistance is 1265 - 1280, 1240 is the line in the sand we'll be watching.
In relation to our open positions, next week is expiry and there's lots of news coming out in the financials that could be a major market mover. For that reason we may close the Put Spread depending on how we go around the start of next week. While we remain confident that the 1200 level will hold, the high degree of volatility is a risk that needs to be managed. As long as 1240 level can hold, that should be enough of a buffer to see us through.
The quote this week is from George Bernard Shaw, " When I was young, I observed that nine out of ten things I did were failures. So I did ten times more work."
Have a great weekend and feel free to email me at email@example.com with any questions or comments.