[Weekend Summary]
Dear Member:
This short week saw the major averages gain back some ground, but in each case, they closed out the week without any clear breakthrough of important resistance levels. The Nasdaq Composite showed some strength, but not enough to conquer the resistance around 2534. The Dow and S&P 500 also each came to rest while still dealing with resistances around 12,750 and 1400 respectively. Until those levels are broken decisively,we are still just looking at a bullish retracement in a longer term bearish move.
One stock that did move up strongly was Cognizant Technology Solutions (CTSH) on which I owned the Jan 35 puts. As the stock climbed, I used that position to create a diagonalized calendar spread by selling the Oct 30 puts on Thursday. That second leg is already profitable and, depending upon price movement, I may roll that to a 35 put. The intent for me was to reduce overall risk in the initial position while using it to create the spread to bring in income. This is a case where I am working to make lemonade out of lemons and so far, there is some reason to believe it just may work out.
Meanwhile, I closed the short leg of my Citigroup (C) spread and captured a 70 cent a share profit before commission on that leg. In a similar move, I also closed the short leg of the spread on SPY as the S&P 500 turned up and grabbed a 29 cent a share gain before commission on that leg in just 6 days. I'll sit tight on the long legs of both these positions as long as the share price continues up, but on a downturn, would expect to sell other calls as covered positions against them to bring in yet more income and attempt to further reduce risk in the longer expiration long positions.
Straddles like the one on Stec, Inc. (STEC) can take some time and that is what is going on here. I am waiting for a sharp move and/or implied volatility spike to see a profit on that play.
Once again, with Sirius Satellite Radio (SIRI) I am looking for a spot to sell some calls against my longer term long call position.
I hope you have a great weekend.
Bill
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