Broad market support?

Will the 50 MA provide support?

I was speculating, over the weekend, the relative risk of the RUT versus the IWM.

 So, I created a spreadsheet that computes profit, risk, probability of success and return on investment.

 I think the results are interesting.

 Assumptions:

• Successful trades are removed at 90% of their profit potential ( commissions on both sides)
• Unsuccessful trades are allowed to expire (commissions only on entry)
• All trades are vertical spreads and thus have two legs
• Commissions are $1.50 per option

  

 On the IWM trades I tried to match the profit potential of the RUT.

 As the spread increases and the number of options, so does the risk, while the ROI decreases.

 It would appear that a single trade on the RUT is actually much less risky than putting on 15 IWM trades over a several day period.

 What do you think?

 

 

 

SOLD VERTICAL VMW 100 MAY 08 65/60 PUT @2.30

This is what I wrote last night. In after hours trading the stock have moved up 14.6% to $66.5.

This is setup for a nice play to the upside. As you can see in the screenshot, there pretty much is no resistance till 71.2 level, and the gap fill goes up to $77.7. Considering the downtrend prior to the gap down, the $77.7 resistance should hold and stock should channel in $55-77 range for a period of time. Because of the high volatility I do not feel comfortable buying options, but I will be setting up iron condors for the 60-85 range. I don’t feel that $60 is strong resistance level, but there should be plenty of time in the next 24 days to close that leg with some gains

The reason I have opened a 65/60 leg is the lucrative 46% gain on the trade when the stock was at $63.0. Per what I’ve said earlier, I don’t think that I will keep this trade to expiration.

Bought to close:VERTICAL DIA; APR 08 129/130 CALL @.02

I hadn’t even checked the markets today when I got a message on my way to lunch that a trade had been closed out…

This was an automatically triggered buy back for a trade listed in an earlier post. The original sale was for 25 cents ($0.25). It was bought back for 2 cents, so the profit for this is 23 cents (multiplied by 100…more than once). TOS doesn’t charge commissions when closing a trade for less than 5 cents (yeah TOS!), so this was a commission free close.

Getting all but 2 cents and freeing up capital a week before expiration all without commissions…not too bad.

OIH – Oil Service Holdrs

Sell APR Call vertical	-190 / +195
Credit $1.25	Spread $5.00
Probability of success	72%
Short delta	.33

In & Out like the burger

I bought an APR 27.5 PUT on (C) and a 40 APR PUT on (VZ). I plan on being out of these trades in 2 days, 3 at the most. I think both stocks will come down in the next 2 days (Thurs & Fri). They’ll probably have an up move on the third day (Mon) which is why I’d like to get out of them at the end of day 2 (Fri). Thaaaaats’ right, my magic ball told me that. Let’s see if I’m right.

WLT – Walter Industries

Sell APR Call vertical	-70 / +75
Credit $1.10	Spread $5.00
Probability of success	75%
Short delta	.35

 

 
 

SOLD VERTICAL DIA – APR 08 129/130 CALL @.25

The subject trade filled, with a 75% probability of success and a 25% reward potential.  A littles less return for the risk than I’d like.  However, since I didn’t get the slightly better fills on yesterday’s slight upward movement I suppose I’m OK with hitting par on a slight downward move (given that I’m selling calls).

The graph below is what I’ve been looking at, which could be a nice roll on reasonable support; 50% of a short term channel, based on a 10 year trend.  It’s also worth noting that the RSI for DIA is at about 55, which is approximately where it’s been rolling for the 5-6 months.  It’s been bouncing between 52-55 and 25-30.

Unfortunately this didn’t fill: SELL VERTICAL SPY  – APR 08 140/141 CALL @.26.

Looking for SPY and IWM or RUT trades tomorrow…

SPY & MNX – SELL VERTICAL APR 08 CALL

I put these 2 on around 10am with about 10 cents of additional credit at that time. They both moved pretty close but didn’t fill and I wasn’t willing to adjust. Both trades had approx. 75% prob. of success and 30-35% return potential.

SELL VERTICAL SPY APR 08 141/142 CALL @.30
The mark for this made it to around .27.

SELL VERTICAL MNX APR 08 190/192.5 CALL @.75
The mark for this made it to around .70.

(XLF) APR PUT

On 3/19 I bought a APR PUT on the (XLF) with a 28 strike and a delta of -.76. The financials are struggling. Although they bounced back on Thursday the 20th, I think with the climate of the market and economy this trade will be profitable before its expiration. Plus I needed a thrill.