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[Weekend Summary]

Dear Member:

A pretty bullish week overall and, maybe significantly, the VIX had a big drop Friday. Monday will be a shortened trading day and the equity and equity options markets will be closed on Christmas day. Merry Christmas to those who don't take offense, and to those who may be offended, have a very pleasant December 25th.

I had a winning trade and a losing trade close today. United Technologies (UTX) closed where I didn't want and my spread ended with a loss. The iron condor on the Russell 2000 (RUT) ended quite well, however, closing with a before commission return on risk of 23.6%.

The spreads on QQQQ, SPY, and Sirius Satellite Radio (SIRI) are all still ok. I may get another adjustment -- maybe two -- out of my spread on Citigroup (C).

Definitely the most interesting play to me in a while has been the original naked put sale on Genitope (GTOP). I opened the trade for a credit of $1.35 a share by selling the Jan $2.50 puts. That meant that the worst thing that could happen to me would be the stock would go to zero, I would have to pay $2.50 a share for it and I would have lost the $2.50 a share less the $1.35 the market paid me to enter the trade. It was obvious that the premium was quite inflated when I entered the play and could signify a major move in the stock. On Thursday, there was profit in the position so I took 1/2 off the table and captured a 15 cent a share profit on those contracts I closed. After bad news, the stock price plummeted and it closed Friday at 82 cents. Where does that leave me? Well, I have 15 cents a share profit in hand from the closed positions. The stock will probably be put to me at $2.50 a share, but the market had paid $1.35 up front so my loss would be $1.15 a share on 1/2 my position that remains less the 15 cents a share profit from what I sold. Now the loss would be $1.00 a share EXCEPT I will then have the shares and could either sell them at $0.82 for a loss of just 18 cents or I could hang on and see if I could sell some covered calls. While it certainly looks like this trade will end in the loss column, it is valuable to see how one can take steps to minimize a loss even when the stock crashes as it did here.

Bill

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