[Weekend Summary]
Dear Member,
The markets have been relatively quiet for the last few days. I made two plays during the week. I sold some Jan '06 129 calls on SPY for 40 cents when the stock showed some short term weakness. This position converted my Dec '06 120 LEAPS calls from a pure directional play to a bullish call spread. The net effect was to bring in some income and reduce my risk in the initial play. If SPY doesn't get above 120 by Jan expiration, I'll just keep the 40 cents and realize a 2.9% return before commissions on about a three week play.
I also entered a straddle on Cardinal Health (CAH) buying the Jun 70 puts and the Jun 70 calls when the implied volatility is in the 5th percentile. Since volatility has a tendency to regress to the mean, I am looking for an increase in volatility which could have the effect of increasing the value of both the puts and the calls if there is a stong move. I entered the play with CAH at resistance so I am looking for either a drop in the stock if it can't break the resistance or a run up if it can break through and hold above resistance. Interestingly, it did gap up this morning and closed slightly above resistance but on awfully light volume. A move in either direction that happens fairly quickly and is fairly strong could also result in a nice gain.
As for preexisting positions, CHINA returned to a multiple bottom support and then bounced up. Micron (MU) remains in a nice uptrend from last April's bottom. EBAY was down for the week, but is consolidating and is still in its' uptrend.
My biotech ETF broke below support and I tried to create a spread by selling the Jan '07 220 LEAPS calls against my Jan '07 200 LEAPS calls to do essentially the same thing as I did with SPY. That order was not filled, however, and BBH bounced the next day. It now has risen $8.17 in the last four days.
I hope each of you has a wonderful holiday, whatever your beliefs. For those of you who aren't offended, Merry Christmas!
Bill
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