With the VIX above 40 I do not have too many trades on right now, and so I got bored and went looking for a speculative trade. I think I found one. With the SPX having trouble getting back above 1100, it makes it a good time to sell some weekly Calls. Actually I was thinking of selling Weekly Puts this morning, but the market came back all the way to 1100 but couldn’t break it.

So here is what I did:

Sell Oct1 11 1145 Calls and Buy Oct1 11 1150 Calls for a credit of .55 each

85% Probability of Profit. 12% Potential Return.

I don’t want to hold these all the way to expiration (Friday). I am expecting SPX to drop after failing to raise above 1100 and will exit the trade with a respectable profit. If SPX breaks above 1100 to about 1110, I will probably exit the trade as well [...]

Here’s a trade if you are brave enough:

S&P500 is down about 2.5% today. Sitting at 1145.

I am taking a stab at some weekly Puts.

Sell to Open SEP2 11 1070 Puts, Buy to Open SEP2 11 1065 Puts for a credit of .35 each

That equals roughly a 7.5% profit potential. These will stop trading Thursday at the close. The settlement price will be released Friday morning. Same as with regular SPX options.

As long as the SPX stays above 1070, this trade makes money. It has a 90% chance of doing so.

Will SPX drop 80 points in a couple days? Seems unlikely but who knows. Still, I like my chances.

I often get asked by members which are better to trade, Indexes or ETFs. “Should I trade SPY or SPX, IWM or RUT, QQQQ or MNX?”

The answer is, it depends. But I do have my preferences.

Liquidity

Both ETFs and Indexes are very liquid.  As I write this the At The Money Call in  SPX has an open interest of 45,000 contracts. The SPY At The Money Call has an open interest of 85,000 contracts. So both are very liquid. Major hedge funds though trade the indexes because they trade directly with the market makers.

Advantage: Even

Commissions

Commissions play a role because the SPX is ten times larger than the SPY. So if you want to trade $1,000 credit spread, you can do it with a 1 contract spread in SPX or a 10 contract spread in SPY. If you are paying per contract, the commission to trade SPY is ten times larger. if you [...]

Got the following question this week:

First, thank you for providing a great service. I have been trading options for about a year and have learned a lot from your tips and alerts.

Now, I have a question about position sizing.  I am trading $100k of my funds using your alerts. When you send out an alert I multiply the number of contracts by 10 when putting on the trade. My question is: instead of just multiplying the contracts, can I use a combination of increasing the contracts and/or increasing the width of the strikes?

For example, if the alert was to sell 2 SPX 1200/1210 Calls, instead of selling 20 10 point spreads, could I sell 10 20 point spreads? What would be the pros/cons of doing something like this?

It seems to me, if I widen the strikes, then when I need to make an adjustment, I could sell the near strike [...]

The results are in.

For October 2009, OptionGenius.com was  + 2.72%.

Not very impressive is it. But the S&P was down -1.98%.

Trade #4 for the month was rolled forward to November. If I had not rolled it, it would have expired worthless and with a profit. Instead it is now  November Trade #3.

Both iron condors did great in October. I took a more conservative stance this month because of October usually being a very bad month for the markets. And this one did not disappoint.

It started out smooth, then dropped towrdas the end of the month, then reversed and rallied up just as fast as it had dropped.

Can you saw “whipsaw?”

But  both condors did great with no adjustments required. What really hurt was an IWM butterfly that busted my chops. If I had just put that trade on and forgot about it, it would have been profitable, but alas, that’s not [...]

For the month of May, my results were a nice gain of 11.71%!

This is following a nice double digit gain last month.

We had four trades this month:

SPX, the S&P 500 index
RUT, the Russell 200 Index
 AAPL, Apple Computer
 WMT, Wal-Mart.

I recorded double digit gains on three of these and a 9.5% gain on the SPX position.

Just another day at the office.

OptionGenius.com members can see each trade and any adjustments on the Past Trades page in the membership section of the site. If you are looking for double digit monthly returns, what are you waiting for? Sign up today. I already have one trade for June underway and I am looking for more.

One of my favorite habits is to reward myself after a positive month. To treat myself,  my wife and I go out to lunch at one of our favorite restaurants. Normally it is my favorite, On The Border. But this [...]

For OptionGenius.com members:

I just entered a new trade. I have also made an adjustment to a current trade.  Our SPX trade has given us the opportunity to exit one side of the trade. The other side is still doing well.

http://www.optiongenius.com/amember/login.php

So far this month, all three trades are doing very well. And this fourth trade which I added today also looks to be very profitable. This trade is on WMT. Wal-Mart just had earnings last week and the stock is in a well defined range. The volatility of this stock has also been declining meaning that the chances of huge wild fluctuations is declining.