[Weekend Summary]
Dear Member:
After descending from mid-May, it looks as though the markets may have turned the corner back up. The Dow 30 Industrials, Nasdaq and SP-500 each had follow through days yesterday when they were up on very strong volume. I am looking forward to next week because I think there may be some very attractive bullish trades available. I didn't do much today since we are entering what is essentially a 4 day holiday and the market could be a little more unpredicatble than usual with the annual rebalancing of the Russell indexes. As the day unfolded, the Dow, Naz and SP-500 were all down slightly, but on much lesser volume than yesterday.
Both the Diamonds (DIA) and the Q's (QQQQ) had very bullish days on Thursday and were only off a bit on light volume today. I own Dec 36 puts on the Q's for which I paid $1.40. Since I'm looking for the Q's to move up, I plan to sell slightly out of the money shorter term puts to reduce risk in the position. I could take a loss, but I think I may be able to turn things profitable by creating a spread or spreads over time on this existing position. The DIA is similar in that I already have a spread that I opened by selling the 110 calls and buying the 111 calls for a credit of $0.45. That means my risk is 55 cents if I do nothing. Assuming my analysis is correct, I'll look to buy to close the 110 calls and let the 111's run up with the market.
In a related strategy, I had had a spread on the tech ETF (XLK) where i had sold the Jan '08 22 calls against my Jan '08 15 calls. I closed the short leg during the week and enjoyed a 20 cent profit on that leg. If XLK goes up from here, I plan to enjoy the ride; if it retreats, I'll sell another call to create another spread, bring in some income and reduce risk even further in the overall position.
Sirius Satellite Radio (SIRI) has been moving up nicely. I own the Jan '08 $2.50 calls so I'm about $2.25 in the money. As it continues up, I'll sit tight. Depending where it turns back down, I'll either close the position for a profit or sell another call to create a spread.
Conoco Phillips (COP) has been moving back up, again giving life to the call side of my straddle.
The Biotech Hldrs (BBH) have also moved back up. Today, they gapped up and closed at a resistance. Same plan here as for SIRI and XLK.
SPY which tracks the SP-500 leapt forward Thursday and lost only a tiny bit today on very light volume compared to the bullish move yesterday.
Micron (MU) dropped to support this week. I have a spread position with very modest risk that I'll adjust if and when necessary.
I hope you have a great, safe 4th of July holiday. Thank you for subscribing.
Bill
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