[Weekend Summary]
Dear Member,
Only a little action for me this week as the market seems poised to decide on a direction from here. I adjusted my original 39 Mar straddle on QQQQ when it dropped by rolling down the Mar 39 calls I owned to the Mar 38 call. That move reduced the risk in the position overall as explained in the alert.
I also sold some Jan '07 15 calls on Micron (MU) for $1.45 a share. Since I own 10 of the Jan '07 10 calls at an original cost of $3.50, I was able to bring in $1,450 less a $13 commission. The return on my original investment, therefore, is just a little over 41% after commission. This move also reduced the overall risk in the initial position and assured a nice profit if I just hold to expiration (which is not likely) and the stock is above $15 at that time. Since I own the Jan '07 10 calls, the position I just entered is covered and, I have actually created a bull call spread (long the Jan '07 10 and short the Jan '07 15). If I happened to be called out at 15, I could buy the stock for 10 (or utilize a same day substitution) and assure a $5 a share gain (less my original cost of $3.50 plus the $1.45 I brought in on this trade). In other words, if called out, I would net $2.95 before commissions on a $3.50 investment or an 84.3% return on investment in about 21 months or an average of around 4% per month.
EBAY has continued its' consolidation into a triangle formation so, as yet, I have nothing to do.
October is often an interesting time in the market. Right now, each of the major indices (Dow 30, Nasdaq and SP-500) has dropped to a support level and, just today bounced up off that support on decent volume. At the same time, the volatilities represented by the VIX, VXN and VXO have each turned down. These movements suggest a turn to the bullish, but I am not ready to jump just yet.
I was looking at some tempting possibilities on AMD, SPY and KLAC this afternoon, but decided not to enter anything before the weekend. Since we are in earnings season, I believe it is important to check earnings dates before entering any position. Earnings announcements often have a major short term effect on a company's stock so I frequently avoid being in a position at the time of the actual announcement.
I just have a hunch that next week may be fun.
Bill
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