9/21/2007 7:08:44 PM
This month, we had a 12% gross gain. That brings this services net gains to $6,463 with a net portfolio gain of 64.63% over 9 months. A 79.42% Annualized Return!
This month we had a jumpy market full of whipsaws and then a 3% burst higher in one day on Tuesday, after the Fed surprised the market by dropping rates by half a point. While all this was happening, we quietly collected a double-digit return knowing that we had a huge buffer of safety on our sold strikes. On to the next month...
Our system remains in Buy mode, the market gapped up on open Friday and didn't back filled which meant our new October position didn't stand a chance of getting filled.
For Monday, again I suggest to only do half the amount of spreads for the capital you have allocated to this strategy. The suggested trade to be placed for the open of trade on Monday Sep 24 is:
BUY to Open SPX Oct 1340 Put Option (Symbol: SXYVH) and SELL to Open SPX Oct 1350 Put Option (Symbol: SXYVJ) for a minimum net credit of $0.40.
This equates to a premium you receive of $40 per $1,000 of margin (before commissions).
We finally got our bullish confirmation during the week with a close above 1500 as the bulls smashed through resistance. From the chart above, notice the symmetry that's developed, if you're into technical analysis, you'll appreciate the beauty in this pattern. The shaded area now shows the new uptrend and the two likely scenario's are that we'll either continue higher to the old high of 1555 odd before dropping or we'll get a retracement to the 1485 region before continuing higher. Stay tuned, as we may enter a new trade suggestion next week.
Summary of Position Last Month
We entered a Sep 1310/1300 Put Option Spread on August 9 and received a premium of $80 per spread. Then on August 17 the market conditions changed and we entered a Sep 1580/1590 Call Option Spread and received a premium of $40 per spread. This equated to a net return of $110.05 per $1,000 of margin or 11.05% after commissions for a little over one month (using Interactive Brokers commission rates, note IB will be dropping their rates further from October 1). The CBOE settlement price for the SPX options for September was 1533.38.
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