Thursday, January 15, 2009 12:46 PM
Hello everyone, I?m excited about our upcoming Option Users Group meetings. As indicated in a previous e-mail, I?ve established meeting dates and option topics for the next 6 months. In addition, as I noted in that prior e-mail, I?ll be following a set format for each meeting that hopefully maximizes our time together while allowing you to gain as much trading insight as possible. I?ve included a copy of our meeting dates and agenda topics below for your quick review.
Our current trades seem to be working out very nicely?the one highly speculative trade, ROH (Rohm & Haas) proved to be a solid winner bringing us almost 375% in 3 weeks?.again, these types of trades are risky so you don?t want to allocate more than 5% of your trading capital to this position, but if they pay off, they really do pay off?..basically we executed a Calendar Spread taking advantage of the front month volatility which was almost double the back month (due to a pending Dow Chemical acquisition)?anyway, this one was a solid winner?.on the other hand NOV (National Oilwell Varco) was a breakeven trade?.we were up but a quick turn in the oil markets hurt our position (we executed a Diagonal Spread) so I exited stage left so to speak?..I decided to exit the position because the markets are exhibiting a downward bias at this time so I suspect that trade will continue to downside had I held on?.(remember, cut your losses very quickly, let your winners run?.)..
Speaking of the downward market bias, take a look at the chart below. This is a chart of the SPX (S&P 500).
(Chart generated with E-Signal)
Lots of things going on in this chart, but here are a couple of highlights?.if you follow Elliot Wave theory (I do) you?ll see that S&P appears to be heading back down to retest the Nov 2008 lows of approx 750?.you can see in the chart above where the uptrend regression line was broken and S&P appears to be heading back down?.the colored bar sitting right at 660 is where the Elliot Wave theorists are predicting the S&P 500 will fall to based upon this next leg down?.with this in mind, I executed a Bear Put Spread on January 7th by buying the 91/80 Put Spread?.I am up about 22% as I write this e-mail??by the way, for our upcoming session this Saturday we?ll go over Vertical Spreads in much more detail so you?ll have a better understanding of how to use them?.Spreads are a great way to play directional bias trades in this market since the volatility is still high and movements are more pronounced than normal??Spreads also allow you to hedge your option delta giving you more staying power in the position (don?t worry, you?ll learn what this means, why its important and how to use this knowledge to your advantage).
By the way, if I don't have your e-mail address then you will not be able to completly see any e-mails where I post charts, option modeling figures ect since Meetup.com does not do this well....you will need to send me your e-mail address and I will add you to our e-mail distribution list........
Below, are our upcoming meeting schedules??see everyone soon.
1. Jan 17th ? Vertical Spreads (Bull Call Spread, Bear Call Spread, Bear Put Spread, Bull Put Spread)
2. Feb 28th ? Time Spreads; Calendars and Diagonals
3. Mar 21st ? Winged Spreads; Butterfly?s and Condors including the Irons
4. Apr 18th ? Straddles, Strangles and Ratio Spreads
5. May 16th ? Synthetics
6. Jun 20th ? Putting it all together