The market is now a mirror image of its pre-market gains, with the Dow down 60 points, and below our upside adjustment point. Nevertheless, we’re going to take advantage of the pullback to reduce the negative delta of this position, by rolling up the put side, as follows: Day limit order Buy to close 2 DIA May 73 puts Sell to close 2 DIA June 68 puts Buy to open 2 DIA June 77 puts Sell…
Monday, May 4, 2009
IBM closed at $106.19 today—$0.09 past our original adjustment threshold and well above the $105 level we’ve lowered it to because of the increased upside risk we talked about in last Thursday’s position update. Today’s 214-point gain in the Dow had a significant impact on our DIA positions as well. In light of these developments, we’re leading off this week’s Update with our portfolio positions, starting with IBM: IBM May/June Calendar Spread At the closing bell today, our…
Monday, April 27, 2009
The bulls managed to find another foothold in the “wall of worry” last week, with the S&P 500 Index surging strongly off a triad of support in the 825–830 range (from the 20-day moving average, former downtrend resistance turned support, and the April 9th gap, which was itself a mirror image of the February 17th gap that kick-started the steep decline into March). This level also coincides with a lower channel line drawn parallel to the line that formed the…
Friday, April 17, 2009
We’re opening the following position for May expiration: Day limit order Buy to open 2 DIA June 85 calls Sell to open 2 DIA May 85 calls Buy to open 2 DIA June 78 puts Sell to open 2 DIA May 78 puts for a net debit of $2.78 or better. Note that our base position is 2 contracts per leg. Trading whole-number multiples of the base position ensures that adjustments will not result in…
Wednesday, April 15, 2009
Our adjusted DIA April/May double-calendar briefly grazed our 15% profit target (yet again) just before noon, only to fall back before we could even get a probe order filled. But we’re in business to generate steady monthly income, not to bet on the lottery—so with only two trading days left before April expiration and the bulls stubbornly hanging tough, we’re closing out our remaining position. Because we have calendar spreads at three strikes, execution is going to be a little…
Tuesday, April 14, 2009
We’re taking advantage of today’s pullback to pare our upside risk heading into April expiration, by closing out the double-calendar from our adjusted April/May DIA double-diagonal position, as follows: Day limit order Buy to close 2 DIA Apr 76 calls Sell to close 2 DIA May 76 calls Buy to close 2 DIA Apr 81 calls Sell to close 2 DIA May 81 calls for a net credit of $3.13 or better. Note that the…
Monday, April 13, 2009
The headliner for this week’s update is implied volatility. With April expiration at hand, and implied volatility near its bear-market lows, our focus this week is on our current vehicle of choice—DIA—and the VIX. What stands out on the chart below is the dramatic drop in implied volatility, even as the market fell into Wednesday’s close. We don’t want to read too much into last week’s action, because declining liquidity distorts the market around holidays; however, the…
Wednesday, April 8, 2009
We’re opening our first trade for May expiration this morning, as follows: Day limit order Buy to open 2 DIA Jun 89 calls Sell to open 2 DIA May 84 calls Buy to open 2 DIA Jun 68 puts Sell to open 2 DIA May 73 puts for even money ($0.00) or better. Note that our base position is 2 contracts per leg. Trading whole-number multiples of the base position ensures that adjustments will not…
Monday, April 6, 2009
We’re taking advantage of today’s pullback to close out the put spread from our original DIA double-diagonal trade, as follows: Day limit order Buy to close 2 DIA Apr 64 puts Sell to close 2 DIA May 59 puts for a net credit of $0.12 or better. Note that the 2 contracts above represents all of our contracts in the put diagonal part of this position. Analysis: This “adjustment” is really more a matter of housekeeping and…
Monday, April 6, 2009
With last week’s choppy, news-driven trading, the signals we were getting from our short-term indicators were either valid for only a very short time, or were short-circuited entirely. The area we called “The Zone” clearly was at the center of a region of major contention between the bulls and the bears for two weeks, but it’s also clear that the boundaries defined by support and resistance back in January and February have become blurred. This week we’re again going to…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Thursday, May 7, 2009
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