[Weekend Summary]
Dear Member:
Though the market fell like a stone today, I had a really good week. I bought and sold some puts on WFMI and, before commissions, made a $1.70 profit on a $7.80 investment in just 2 trading days! Today, I sold my Jan '07 2.50 LEAPS calls on CHINA and enjoyed a 30% return before commissions in slightly more than two months. In fact, this is the second time I've experienced a great return on a CHINA trade since the summer.
Also this week, I bought back the Jan 129 calls I had sold on SPY and realized a 30 cent a share gain. Today, I sold the Feb 129 calls on SPY and brought in another 80 cents a share or 5.8% return for the month (if I make no further adjustments). That is a covered position since I own the Dec '06 120 calls. Creating such a diagonalized calendar spread such as I now have on SPY (long the Dec '06 120 calls and short the Feb 129 calls) brings in income and, at the same time, reduces risk in the long position. I just need to be sure that I don't get called out, and if there looks like there is any chance of that happening, I'll close the short position.
The straddles on Cardinal Health (CAH) and Morgan Stanley (MS) should only benefit from added volatility in the market. MS had a sharp move down today and CAH has been moving down relatively steadily. Each of these moves increase the value of the put side of the straddles. If these directional moves continue, the value of the puts should increase more rapidly than the value of the calls decrease. Often a downward move results in an increase in volatility as well and that can help the premium of both the calls and the puts.
EBAY retreated to the uptrend line and BBH stopped at a support today. So far, both these stocks on which I own LEAPS calls are behaving as I would expect.
Micron (MU) is channelling so there is nothing to say or do for me with that spread.
The markets retreated fairly stongly today. The Dow 30 broke below support at 10,700. The next real support I see for the Dow is around 10,200. The Nasdaq also broke down through a support level. It looks like the next support is around 2200 and today's close was just under 2248. The SP-500 appears to have some support at 1248. Next week could certainly take the market down some more.
Thank you for subscribing.
Bill
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